Firms cashing in on growth reflected the state's major industries

By Jerry Ackerman, Globe Staff

Top IPOs

nitial public offerings of stock by Massachusetts companies fell last year to 18, barely one-third the record number of 52 IPOs identified by last year's Globe 100 for 1996.

But those companies that did stick their toes in Wall Street's waters in 1997 to cash in on their growth were an eclectic mix, representing the state's major business sectors - technology, pharmaceutical and medical products, software, finance and real estate, and consumer services - in roughly equal proportions.

In contrast, the previous year's IPOs were dominated by software firms.

For raw dollars, finance and real estate ruled the IPO roost in 1997. Two such offerings accounted for more than half the nearly $1.9 billion Bay State companies raised through IPOs.

The largest was by Boston Properties Inc., raising $785 million for a real estate investment trust that, among other things, bought Boston's Prudential Center.

Affiliated Managers Group which has an interest in 11 large investment management companies, grossed $176.3 million.

Running in fourth place was the Friendly Ice Cream Corp., which had been publicly traded, then taken private. The company went public again to refinance debt so it could expand and revamp its 700 restaurants.

On the whole, the IPO class of 1997 performed for investors better than its predecessor, with 12 of the 18 posting gains as of March 31 , 1998. The 1996 class saw just 22 of the 52 entries in positive territory at the end of March 1997.

Last year's top gainer was Firstfed America Bancorp, a holding company created by Fall River's First Federal Savings Bank of America in a demutualization move.

Robert F. Stoico, Firstfed's president and chief executive, said the bank wanted more capital flexibility as it expands into Rhode Island. The move also positioned Firstfed as a possible merger-and-acquisition player as southeastern Massachusetts banks battle for regional dominance.

Investors responded by pushing Firstfed's share price up 111 percent between the IPO in January 1997 and March 31 , 1998.

Meanwhile, trailing the 1997 pack in share appreciation was Augment Systems Inc. of Westford, a maker of computer servers designed to handle large data files.

Augment went public last May at $5.50, but by March 31 this year was trading at 1 - an 82 percent plunge after some of the first servers it delivered ''caused systems crashes and loss of data'' when they were hooked up to client networks, according to a filing with the US Securities and Exchange Commission.

With production and revenues stalled, Augment's assets fell to less than $2 million. The company faces delisting by Nasdaq unless it raises more cash or a strong, long-term credit line before June 30, chief financial officer Duane Mayo said.

Augment's president and chief executive, Lorrin Gale, quit those posts in March and this month also resigned as chairman of the board. Mayo said a search is under way for successors.

Explanations for the diminished number of initial public offerings in 1997 vary.

Daniel Dykens at Renaissance Capital Corp. in Stamford, Conn., points to a stalled stock market last spring and Wall Street worries about Asian economic turmoil in the fall. ''The IPO market tends to follow the broad market,'' he said.

At the same time, Dykens and others saw a broad shift away from IPOs and toward mergers or acquisitions as investor interest waned in the software, health care, medicine, and technology offerings that had sparked the 1996 field.

''Unless you have Internet, forget about it,'' said Robert J. Crowley at the Massachusetts Technology Development Corp., a Boston-based, quasi-public venture fund.

In addition, with few fundamental innovations in recent years in these fields, most up-and-coming companies are pinning their futures on products targeted to specific, limited markets.

For them, said Crowley, seeking out a merger or acquisition partner holds much more promise - and there are plenty of buyers in the field. ''A lot of bigger companies recognize that it is easier to pay a higher price to buy technology than to develop it themselves,'' he said. ''And a lot of companies are out looking for really good products to put in their pipelines.''

Massachusetts Technology had investment stakes in three companies that emerged from start-up status in 1997, but only one made an IPO - Concord Communications Inc. of Concord, which develops software for managing telecommunications systems. Concord has seen its shares appreciate 87 percent since going public in October.

The others, IVS Corp. of Concord and MultiLink Corp. of Andover, make specialized products in which Wall Street had little interest, Crowley said.

But others did. Schlumberger Inc. of Houston, an oil field services company, paid $90 million for IVS's semiconductor products, while MultiLink, which developed video conferencing equipment, was bought by PictureTel Corp. of Andover for $40 million.

Venture Economics, a division of Securities Data Co. of Newark, N.J., which follows merger-and-acquisition activity, reported that the top 10 such deals in 1997 involving Massachusetts companies were worth an average of about $80 million each.

That's about 23 percent below the average of $105 million raised by the 18 Massachusetts companies that took the IPO route. But if you remove the two largest IPOs, Boston Properties and Affiliated Managers Group, it beats by 36 percent the average gross proceeds for the other 16 companies.

Manu Joglekar, an analyst at Securities Data, said that while these numbers are interesting, they offer no clear guidance for other companies ready to cash in on their early-stage growth. ''Some companies are meant for merger, and some companies are meant for IPOs,'' he said. ''Nothing more than that.''