Marrone Bio Innovations of Davis debuts as public company on Nasdaq
08/03/2013 12:00 AM
08/05/2013 10:28 AM
Often struggling for recognition, Sacramento's high-tech community scored a rare hit Friday – one of its own went public.
Marrone Bio Innovations Inc., a Davis biotech company, made its debut as a public company when its shares began trading on the Nasdaq market.
The initial public offering, or IPO, is the region's first since 2006, when Sacramento online-music distributor Digital Music Group went public. DMG was taken over a year later by a New York company.
Marrone Bio's stock price came in below expectations – and the IPO didn't make Wall Street giddy the way Facebook did a year ago. But in an era when IPOs are relatively scarce, experts say these stock sales are important to a community such as Sacramento.
IPOs bring in fresh capital – the Marrone offering raised $57 million – and make a company more attractive to employees. They also validate the region as a place to do business, especially in the tech sector.
"It's a sign that this is a good place to invest," said Martin Kenney, an expert on regional economies at UC Davis. "That's one sign that your region is creating firms that the greater market values."
Meg Arnold of the Sacramento Area Regional Technology Alliance, or SARTA, said she hopes the Marrone IPO can lead to others among the region's young tech companies.
"I'd love to see a trend build on that," Arnold said.
Marrone, founded in 2006, will use most of its IPO proceeds to bring more of its chemical-free farm pesticides to market.
"We have a big pipeline," said founder and Chief Executive Pam Marrone. "We're submitting products to the (Environmental Protection Agency) and launching them."
Some of the money will be spent retrofitting a factory in Michigan, she added.
The company's stock, trading under the ticker symbol "MBII," was expected to be priced initially in the range of $14 to $17 a share, according to a company filing with the Securities and Exchange Commission.
Instead, it launched at $12 a share. It closed its first day of trading at $13.75.
"I'm still a little bit numb," Marrone said from New York shortly after trading began. "It's been the culmination of a lot of years of hard work."
The IPO is a vindication for Marrone, 56, who founded another successful Davis biotech company, AgraQuest, years earlier but didn't get to taste the fruits of cashing in.
AgraQuest's attempt to go public in 2001 was shelved when the stock market faltered after 9/11. And Marrone was long gone, with her ownership stake diluted to next to nothing, when AgraQuest was sold to Bayer CropScience last summer for $425 million.
At Friday's closing price, Marrone's stock in Marrone Bio was worth $13.2 million, according to an SEC filing. The company's total market value: $232.6 million.
"That's not the biggest motivation (for going public)," Marrone said. "The biggest motivation is we really believe in these products. That's what keeps me going."
Marrone Bio is considered an up-and-comer in the growing field of bio-pesticides. Revenue has doubled in the past two years, to $7.1 million in 2012. Like many young tech companies, Marrone Bio is perhaps years away from profitability. It lost $38.8 million last year. It employs 107 workers.
The shortage of IPOs in Sacramento is partly a function of the region's difficult climate for entrepreneurs. Although Sacramento has had some success lately in breeding clean-tech companies, the area suffers from a scarcity of investment dollars and other key attributes for startups. Promising young companies often get lured to the more established and richer tech climate of the Bay Area.
Beyond Sacramento, the IPO market has been slow generally.
Only 94 U.S. companies went public last year, according to figures compiled by University of Florida finance professor Jay Ritter. That compared with 160 in 2007, the last year before the recession. In 2000, just before the dot-com era collapsed, 381 companies went public.
In Silicon Valley, home to an estimated one-third of all IPOs, initial stock offerings tend to be glamorous affairs, such as Facebook or Google. Andrew Hargadon, an expert on entrepreneurship at UC Davis, said many Central Valley companies tend to focus on slower-growth businesses, like agricultural technology, which can be less attractive to investors.
But he said the success stories, including AgraQuest and Marrone Bio, show that entrepreneurs can prosper in the Sacramento area anyway. "There are opportunities to build companies in the areas where this region has strength," Hargadon said. "We hope we're growing companies that grow a little longer and taller, not the weeds that grow fast and die young."
Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.
This story was updated at 10:20 a.m. Aug.3.
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