Talking it up

Not quite dead, the IPO market has certainly been on life support for the last year. However, a public offering of foreign language software company Rosetta Stone–backed by ABS Capital Partners and Norwest Equity Partners–shows that while the drought may not be ending soon, successful IPOs are still possible in this environment.

The venture capital community has been looking for any sign of good news after two consecutive quarters that saw no venture-backed IPOs in the US. Rosetta filed for a $115 million public float last September and raised $113 million on its April debut. Its $18 share price beat the initial projection of $15 to $17, making the company the first since May 2008 to price its shares above the projected range.

ABS and Norwest – which own a 46 percent stake and 30 percent stake respectively in the company – took advantage of the strong interest for education and software companies, which, along with healthcare stocks, have shown resilience even amid the recession. In December, ABS sold the last of its outstanding shares in online college course provider American Public Education, earning $320 million from its original $18 million investment.

The company also benefited from strong name recognition and a dearth of competition in the IPO market of late. “Rosetta is a very good story in any market given how well the company has performed and we have been waiting since the fourth quarter for the most opportune time. We felt good about the dynamics of the company and the market,” Norwest general managing partner John Lindahl says.

The Rosetta Stone IPO came in the same month that Warburg Pincus-backed Bridgepoint Education raised $142 million, although that total fell below the $216 million originally targeted. Meanwhile, network management software developer SolarWinds, whose shareholders include Bain Capital, is planning to raise nearly $140 million in an upcoming listing.

There are still plenty of firms staying on the sidelines, however. Among them is buyout giant Kohlberg Kravis Roberts, which has again delayed plans to delist its Euronext-traded fund and float on the New York Stock Exchange. However, those private equity firms with portfolio companies in favoured sectors such as education and software may want to consider chancing their arm.

Boston-based private equity firm HarbourVest Partners has closed Dover Street VII, a global secondaries fund, on its $2.9 billion hard-cap, which exceeded its initial target of $2 billion. Among the 197 institutional investors to commit to the fund were the Arizona Public Safety Personnel Retirement System and the Pennsylvania State Employees' Retirement System.

Embattled global bank Citi has decided to shut down its third-party private equity fund placement platform, Citi Alternatives Distribution Group, by the end of the year. The entity will continue to raise capital for the bank's proprietary investment vehicles, but will no longer represent external funds as it no longer attaches strategic importance to private equity fund placement.

Millennium Technology Value Partners is expected to hold a final close by year-end on its second venture capital-focused direct secondaries fund, with a final close expected at between $200 million and $300 million. Its first secondaries fund, Millennium Technology Value Partners, closed on approximately $130 million in April 2006 and is largely deployed.

The Indiana Public Employees' Retirement Fund committed more than $300 million to private equity and real estate funds in April, including $100 million to the Indiana Co- investment Fund, a joint programme between the pension and Credit Suisse (see p 66). It also committed $150 million each to Mesa West Real Estate Income Fund II and Prima Mortgage Investment Trust.