Two Nashville-area companies have filed papers seeking to go public in the last five months, raising prospects that the region could see its first initial public offering reach fruition in more than two years.
But it remains to be seen how much Emdeon Inc. and Noranda Aluminum Holding Corp. can whet investors' appetite for their new stocks amid a difficult market for completing such deals.
Turbulence on Wall Street and a credit market that's in upheaval have made investors more cautious about where to invest their money.
Emdeon, a revenue cycle management company, said it wants to raise some $460 million with an initial public offering. In May, Franklin-based Noranda filed to raise up to $250 million. The last IPO by a Nashville-area company came when Franklin-based drugmaker BioMimetic Therapeutics Inc. made its debut in May 2006.
"The bar has been raised for IPOs," said Francis Gaskins, president of Los Angeles-based research firm IPOdesktop.com. Gaskins said he likes Emdeon's chances of getting out of the gates, although the window has been closed to most private-equity-backed companies because they have too much debt and often aren't profitable.
"This company fits the heightened bar — it's a leader in its field, the market is growing for their business, it has a history of profitability and recurring revenues," he said.
With Noranda paying about 81 percent of its operating income in interest, having less of a history of profitability and not having recurring revenues, it's not as good of a deal, Gaskins said.
"The other thing is that it's an aluminum production company, and as such, could be affected by global economic uncertainty," he said.
Investors 'picky'Matt Therian, a research analyst with Renaissance Capital, an IPO research firm based in Greenwich, Conn., said that investors probably will consider both companies less risky because of their relatively larger size.
"Because investors are going to be picky, that's going to work in their favor," he said.
This year, fewer companies have sought to raise money by selling stock to the public for the first time, and many that did file have withdrawn or postponed those plans.
Year-to-date, 26 IPOs have raised $29 billion, down from nearly $37 billion raised through 156 deals for the same period last year, according to Bloomberg LP. Also this year, 71 companies nationwide have withdrawn or postponed IPO plans, the most since 2002.
Cumberland Pharmaceuticals Inc., a Nashville-based biopharmaceutical company, cited market conditions when it postponed its stock offering last year. That deal hasn't come to fruition.
Emdeon's Securities and Exchange Commission filing, which occurred last Friday, came seven months after two private equity firms paired up to buy the remaining stake in the Nashville company from HLTH Corp. of Elmwood Park, N.J., the majority owner of medical site WebMD.
Emdeon said it would use proceeds to purchase some interests held by its private equity owners.
The rest will be used for working capital and general corporate purposes, including repayment of debt and to fund future acquisitions. After the IPO, General Atlantic LLC of Greenwich, Conn., and Hellman & Friedman LLC of San Francisco would remain among investors in Emdeon.
Emdeon employs 2,250, including 1,100 in Tennessee. The company has been called Envoy Corp., WebMD Envoy and Emdeon Business Services. It processes claims, mails patients' statements and verifies insurance eligibility for clients such as hospitals, doctors' practices, pharmacies and insurers.
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