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April 23, 2004 — The nanotech community has been waiting for this.
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Forget the 1997 debut of Nanophase Technologies Corp. (Nasdaq: href=”http://studio.financialcontent.com/Engine?Account=smalltimes&Ticker=nanx&PageName=QUOTE” class=”inline”>NANX, href=”http://www.smalltimes.com/search_results.cfm?keyword=%22Nanophase%20Technologies%22″ class=”inline”>News, Web). Or last week’s Immunicon Corp. (Nasdaq: IMMC, Web) initial public offering. No, this is the big one. This is, of course, Nanosys Inc., (
href=”http://www.smalltimes.com/document_display.cfm?document_id=6388#nanosys” target=”new”>Profile href=”http://www.smalltimes.com/search_results.cfm?keyword=%22Nanosys%20Inc.%22″ target=”new”>News href=”http://www.nanosysinc.com/” target=”new”>Web null After months of rumors buzzing about an IPO, Nanosys came out of the lab closet Thursday and filed a registration statement with the Securities and Exchange Commission.
The company is seeking to raise up to $115 million on the Nasdaq market and has applied for the symbol “NNSY.” Merrill Lynch, Lehman Brothers, CIBC World Markets and Needham & Co. are underwriting the offering. The funds will be used for capital expenditures and potential acquisitions of products, technologies and businesses, according to the SEC filing. No date for the offering has been set.
The registration statement does not disclose what percentage of the company will be sold. However, if 20 to 30 percent of the company were to be offered, as is the norm, it would put the valuation between $383 million and $575 million.
“This is the first real real nanotechnology company to go public,” said Juan Sanchez, a nanotechnology analyst with investment bank Punk Ziegel & Co. of New York. “It’s great news for the whole sector.”
Upwards of a dozen other nanotech pure plays have been waiting to follow Nanosys, according to Sanchez, whose employer underwrote a secondary public offering of Nanosys investor Harris & Harris Group Inc., (Nasdaq:
href=”http://studio.financialcontent.com/Engine?Account=smalltimes&PageName=QUOTE&Ticker=TINY” target=”new”>TINY href=”%20http://www.smalltimes.com/search_results.cfm?keyword=Harris%20″ target=”new”>News href=”%20http://www.hhgp.com/%20″ target=”new”>Web
Nanosys occupies a special place in the pantheon of private nanotech firms founded the last five years. While the company boasted a mere $3 million in revenues last year, it has corralled a portfolio of fundamental nanotech intellectual property, assembled a world-class management team, raised $55 million in venture backing and cut development deals with the likes of Intel Corp., Matsushita and DuPont.
Perhaps more importantly, it has helped define what a nano startup is. By “real real” Sanchez means that, with Nanosys, the complexity and functionality of anything it makes — and therefore the so-called “value add” — is in the material itself. Think of nanostructures that convert light to electrical power, conduct electricity or perform other useful work. Sanchez prefers that definition to lesser forms of nanotech, where the value add is in an entire system, where the nano part is merely one component among others.
It certainly hasn’t hurt that Nanosys has stayed pretty much on message. One minor shift is that the company no longer expects its initial products to be biosensors, as it predicted early last year, Executive Chairman Larry Bock told Small Times recently. “We’re not pursuing it right now from a commercial product perspective,” he said. Instead, the company is working with the government on biosensor applications.
Nanosys has also added nonvolatile memory to the markets it seeks to penetrate, according to its recent filing. Given the subtle shifts, Sanchez said, the most likely initial product would be solar cells.
But the reality is that until there’s a product and substantial revenues, Nanosys is still just a nano story, although one that’s backed by Harvard Ph.Ds, companies like Intel and a corps of pedigreed executives and venture capitalists. The story is predicated upon seeing nanotech in general, and Nanosys in particular, through the lens of the biotechnology industry, where investors are expected to underwrite a disproportionate amount of promise in anticipation of extraordinary future revenues from products that will not be commercially available for at least several years. Will investors buy it? That will become clear by whether they, well, buy it.
Thiemo Lang, a portfolio manager with mutual fund firm Activest, said the IPO might be a bit early. “This will be very interesting to follow,” he said. “I think they see that the stock market is quite favorable for them.” Lang created the Activest Lux NanoTech mutual fund in 2002.
Lang said a thorough review would occur before any investment decisions were made. He pointed to Nanosys’ cash position as potentially important for its future.
Nanosys appears to be carefully hoarding cash, which would ostensibly give the company leverage to build out manufacturing infrastructure and defend its IP position, both of which carry extraordinary expense. Its financial statements show $5.7 million of cash equivalents on hand at the end of 2003, as well as $35.3 million in liquid investments available for use in operations.
Though no information is yet available, the IPO itself may not occur for months. And the best measure of the company’s potential, said Lang, isn’t the IPO, but what happens when the 180-day lockup period expires and insiders can choose to either offload their shares or stay on board for the long haul.