Smart-grid tech company Silver Spring Networks is finally ready to enter the IPO market.
According to Forbes, the company will be offering 3,705,000 shares in a price range of $16-18 per share, or a total value of $59.2 to $66.6 million. There will be a mid-point mark of $63 million, which is less than half of $150 million the company planned to generate in 2011. The company was forced to add these amendments to its S-1 form, since such a goal would be unattainable in today’s market.
At mid-price range, the company’s total market value will be $754 million.
Goldman Sachs and Credit Suisse are underwriters for Silver Spring's IPO. The company, from Redwood, California, will launch its IPO on the NYSE under the symbol SSNI.
The company networks smart meters to utility companies mostly in the American market. The company also provide software and hardware for connecting electrical grids and addressing power failures faster. Silver Spring has over 22 million contracts with private homes and businesses.
Despite the delay in going public, Silver Spring already has backers, including venture capital firm Foundation Capital, which has agreed to purchase $12 million in shares, according to Green Tech Media. Silver Spring is also doing well in raising funds, with a total of $54 million from Hitachi (OTC: HTHIY) and EMC (NYSE: EMC) in the previous year.
In the company’s history, it managed to raise $200 million dollars in investor funds, according to Crunch Base.
The company seems to have solid base of supporters, so why the delay?
For one thing, there has been slow growth in the American smart meter industry recently, after the 2010 stimulus package that flooded the market with meters ran out. The overseas market only accounts for a small percentage of the company’s overall business, according to Green Tech Media.
The article also mentioned some of Silver Spring’s largest American clients, including Pacific Gas & Electric (NYSE: PCG-PE), FPL (NYSE: NEE-PC), Oklahoma Gas & Electric (NYSE: OGE), Baltimore Gas & Electric (OTC: BGLEI), Commonwealth Edison (NYSE: EXC) and Progress Energy (NYSE: DUK) as major sources of income.
While Silver Spring has a hold in diverse forms of software and hardware, smart meters are the bread and butter of this company, and the slow American market, combined with the small a slice of overseas business, had placed tight restrictions on the company’s revenue in recent years. The company also expects a slump in the very start of 2013.
The overall market demand for green tech IPOs has declined in the past few years, according to Green Tech Media. Many startup companies had either retracted their IPO endeavors or had faced considerable losses on the public market. Many clean energy companies were forced to lower their IPO prices to compensate for lack of demand.
Another article by Forbes touched upon companies like Luca Technolgies, Enerkem, and BrightSource Energy—all of which were forced to cancel their IPO plans last year. Due to an unstable market and numerous job losses, investment hunger for green IPOs has waned. Also, the downgrading of U.S. credit by S&P played a role in market depression, and the clean energy sector was one of the hardest hit markets in the country.
These economic conditions forced Silver Spring to place their IPO aspirations on hold in 2011. It may seem curious that a company suffering from such heavy losses, which will possibly face future dips in the coming quarter, would still decide to enter the market,
However, the year 2013 looks more promising for the IPO market, which may work in the favor of Silver Spring. Despite slow growth and shrinking demand for U.S. meters, there is still strong investment support, as 24/7 Wall Street reports.
The green energy sector on the public market is still under investor scrutiny, but this is not to say there is no more room for another green energy company to make a public entrance. Also, the company may want to seize the opportunity now, since investor backing may not be so strong in the future, if the company decided to further postpone its IPO debut.
One advantage that Silver Spring has over other green companies is the smart meter market and its technology's capability of upgrading electrical grids across the country. While solar and wind technology will take more time to develop in the coming years, Silver Spring already has firm footing in the energy market. According to the company website, it has a reach in electric vehicle technology, network and security, and energy efficiency for electric grids.
Silver Spring has more tentacles in the energy market than companies that manufacture only one type of green energy product.
The company will have to secure a path of growth, and this could be remedied through expanding international markets and/or heavy investment in the American grid system in order to fill the void of smart meter fatigue. Since the American electrical grid is grossly outdated, the company could fill this market niche in the future.
Good Luck Investing,