Chipmaker Smart Global Holdings upsizes IPO
The tech industry is diverse. Companies that operate in it do everything from make apps to manufacture computers and design buildings. But if there’s one thing that all tech companies share, it is that they carry a lot of risks- more so when they upsize IPOs.
Smart Global Holdings is one such company. Smart Global is a maker of the chips used in computers and smartphones. The Newark, CA-based firm is the largest supplier of these chips in Latin America in addition to being one of the largest across mainland USA. The IPO that the company upsized will mark the third time that the Silicon Valley-based firm has opened its doors to public trading.
Smart Global was not started as the company that it is today. Back in 1988, the firm was started to develop unique technology to be used in computers. The tech industry was not as active as it is today. Seven years into operation, the firm held its first issuance. After the IPO the company was named Solectron and continued with the operations of the first company. In 1999, a private equity firm known as Menlo Park Private Equity bought off the company thereby making it private again. This trend continued until the company held another IPO in 2004, before going private once more in 2006.
For its third IPO Smart Global will sell its stock on NASDAQ under the stock label SGH. The company did not give the date when it will start trading in its IPO announcement. The company plans to sell off approximately 5.3 million of its common shares during the IPO. With each share going at a price range of $13 to $15, Smart Global Holdings can raise up to $91 million in proceeds, with the company getting $74 million if it sells at the midpoint. This IPO deal is an upscale from the previous $50 million issuance that the company had announced. If Smart Global sells all its shares at the IPO price, it will have a fully diluted market value of $302 million. The underwriters in charge of the deal are Barclays Capital, Deutsche Bank, Jeffries &Co. and Stifel.
The market for the Smart Global IPO is uncertain. The good part is that the company reported increased revenue in its last two years of operation. For the six months ended February 24th, 2017, Smart Global brought in $331.3 million in revenue, a marked increase from the same period in 2016 when the revenue amounted to $238.6 million. Also, for the fiscal year that ended on February 28th, 2017, the firm had $627million in sales revenue which is a promising figure to any investor.
There is no doubt that the company is profitable. However, what makes Smart Global an unfavorable investment prospect is the unpredictability of its performance. For one, the tech market is volatile so the company could become a liability at any point. Additionally, in the six months before August 2016, Smart Global’s sales revenue stood at -17%. In the six months after that, they stood at +39%. While this is a sign of marked improvement, it brings up the question what happens when the company starts making such drastic losses again.