Convergent Pulls IPO
Convergent Networks Inc., which provides telecommunications equipment that integrates voice and data networks to service providers, withdrew its initial public offering filing with the Securities and Exchange Commission today.
The company filed its S-1 back in September just as the hot IPO market started to cool off (see Convergent Heads for IPO). But back then, Convergent and other private companies hoping to cash in on huge valuations didn’t expect that the capital markets would dry up so quickly.
"Clearly, the state of the market is not favorable to IPOs right now," says Sally Bament, vice president of marketing for Convergent. "So, we decided to pull it and watch the market.” The offering was supposed to raise between $75 and $85 million from the sale of its 5 million shares. The lead banker handling the deal was Credit Suisse First Boston.
In the original S-1, Convergent only had booked revenue from one customer, Global NAPs. But in the amended S-1 filed in December, the company says that it had booked revenue from two other customers. And according to Bament, it has announced deals with a total of 11 customers. Still, despite the growing customer base, the company felt compelled to step aside and watch. A smart move considering Sonus Networks Inc. (Nasdaq: SONS), one of its competitors that went public last spring, has seen its stock dive from a high around $90 a share to roughly $19 a share today (see Sonus Raises $115 Million in IPO).
"I don’t know when we’ll be able to file again,” says Bament. “It’s really out of our control. I wouldn’t even want to try to guess right now.”
Bament is confident that the company will be able to weather the storm. In the amended S-1, Convergent reports $6.7 million in revenue for 2000, and Bament says it closed a private round of funding just before filing for its IPO. As for Convergent’s 300 plus employees, she denies rumors of layoffs.
-- Marguerite Reardon, senior editor, Light Reading http://www.lightreading.com