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L.A. investment bank Imperial Capital postpones IPO as investors balk

February 3, 2010 | 10:11 am

Wall Street’s hope for a revival of the initial public stock offering business this year has been quashed by fading investor interest in new deals.

The latest casualty: Century City-based boutique investment bank Imperial Capital Group, which on Wednesday abruptly postponed its IPO.

Imperial's underwriters, Bank of America Merrill Lynch and JMP Securities, couldn’t attract enough buyers despite the decision on Tuesday to cut the proposed offering price to a range of $13 to $15 a share from a range of $15 to $17.

Imperial, which provides trading services to institutional investors and investment banking to middle-market firms, had hoped to raise as much as $150 million when it announced the IPO last fall. If it had been able to sell the planned 6.7 million shares at the range midpoint of $14 on Tuesday, it would have raised $94 million.

Imperiallogo Imperial’s decision to pull back followed a poorly received IPO by Ironwood Pharmaceuticals Inc., a Cambridge, Mass., drug development company that hopes to introduce a treatment for chronic constipation.

Ironwood had expected to price its IPO as high as $16 a share. Instead, the company late Tuesday agreed to sell 16.7 million shares at $11.25 each. The stock has begun trading on Nasdaq under the ticker symbol IRWD; it’s up a few cents early in the session.

Ironwood’s pricing was “aggressively needy,” said Ben Holmes, head of MorningNotes.com, an IPO research firm.

Investors may be balking at new IPOs because the issues that came to market in January have mostly performed poorly, not unlike the stock market overall. Of seven new stock deals priced last month five are trading below their IPO prices, according to data firm Renaissance Capital.

“Investors are looking at deals very carefully to see if they want to be involved,” said Sal Morreale, who watches the IPO market at brokerage Cantor Fitzgerald.

Founded in 1997, Imperial Capital was a unit of Imperial Credit Industries before becoming a standalone business. Imperial Credit, a Southland financial firm spun off from the old Imperial Bancorp (now part of Comerica Inc.), filed for bankruptcy protection in 2003.

Imperial Capital says it has been profitable every year since 1999, but it remains a small player. The firm earned $13.9 million in the first nine months of last year on revenue of $86 million.

Although Imperial sought to offer public investors a piece of the business, new shareholders would have been marginalized: Under terms of the IPO, the company’s chief executive, 44-year-old Jason Reese, and president, 49-year-old Randall Wooster, would have retained majority voting control of the company via their Class B share holdings.

-- Tom Petruno
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