Case in point: Electromed Inc. in New Brighton, Minnesota said Friday that it will offer 1.7 million shares at $4 a share, at the low end of the $4 to $6 guidance it issued earlier this month. Do some simple math and that comes out to $6.8 million before underwriting discounts and commissions.
Compare that to May, when Electromed said in its registration filing that it wanted to raise $13.8 million. I think that already qualifies Electromed’s IPO as a real stinker.
What gives? It’s not as if Electromed is some shell company or an unproven startup. Electromed, which already sells devices approved by the Food and Drug Administration that clears lungs of excess secretions, is profitable and growing.
For the year ended June 30, 2009, the company had sales of $13 million and net income of $1.4 million, a 48.5 and 377 percent increase respectively over the previous year, according to documents filed with the Securities and Exchange Commission.
So clearly there’s some disconnect between a company’s financial performance and the price investors are willing to pay for its stock offering. It’s no wonder General Motors Co. doesn’t want to rush its expected IPO, despite boasting $1.3 billion in second-quarter profits.
At this point, you can’t blame a company for wanting to wait out the market just a little bit longer.