Industry taking interest in Integrated Alarm’s IPO

Friday, August 1, 2003

ALBANY, N.Y. - In late July, Integrated Alarm Services Group appeared ready to take the plunge with its initial public offering, more than eight months after first filing with the Securities and Exchange Commission.

According to Jack Mallon of Mallon Capital, all eyes in the security industry are on Integrated Alarm to see how the stock will fare.

“There have been very few, if any, security companies that have gone to the marketplace [in the last two years],” he said.

Some analysts have indicated that the company’s IPO may not be the boon Integrated Alarm, known as Criticom, hoped for when it first proposed the offering. According to a report by Morgan Stanley, there are some aspects of Integrated Alarm’s deal that may deter investors. For starters, the size and scope of the IPO has been changed a number of times since late last year.

In late June, the company filed an amendment to its stock registration filing with the SEC. This filing increased the size of its proposed initial public offering, the fifth such change since Integrated Alarm’s initial filing in November 2002.

At press time, the company planned to increase the number of stocks it would offer to 22 million, up from the 14.3 million indicated in a June 2 filing. If it sold those shares within the target price of $9 to $11 per share, the company could stand to rake in more than $200 million through the IPO.

In its original filing, Integrated Alarm said it planned to sell 10 million shares to raise $96 million.

Integrated Alarm’s finances may also make investors leery. The company posted losses of $19.3 million in 2002, followed by a loss of $12.3 million in the first quarter of this year, according to SEC filings.

A company spokesperson said the company could not comment on the IPO or the company’s finances due to an SEC-imposed quiet period.

In recent months, the market for IPOs in general has been a bit soft. According to IPO Monitor, a Los Angeles-based consulting and analyst firm, in the six months from Dec. 12, 2002, to June 11, 2003, there were only about 12 IPOs, which raised a total of $1.6 billion. This is below the pace set in 2002, when there were 81 IPOs, which raised about $37 billion.

“The 2002 number was the lowest number of deals in two decades,” Mallon said.

However, that trend has been reversed of late. Rich Peterson, chief market strategist with Thomson Financial, told Reuters that June and July have been the first back-to-back months this year in which IPO issuance has been in excess of $1 billion per month.

For comparison, Mallon pointed to three security companies that have gone public since 2001 – Diversified Security Solutions Inc., Verint Systems Inc. and Veridien Corp.

When Verint went public in 2002, its asking price per share was $16. In mid-July, the stock was selling for more than $25. Diversified’s asking price in November 2001 was $7, which is about what it was selling for in July. Veridien was recently acquired by General Dynamics Corp.

“It’s been very, very weak in terms of numbers, but on the other hand, the companies that did go out fared pretty well,” he said. “Diversified, Verint and Veridien have all fared quite well in a very weak market.”

Once Integrated Alarm has completed its IPO, the company’s stock will trade under the symbol IASG on the Nasdaq.