RadView Software (Nasdaq:RDVW) raised $40 million in its initial public offering on Wall Street yesterday. Its shares sold at $10, the bottom of Tower Semiconductor (Nasdaq:TSEM) $10 to $12 range. Also, the market's distaste for Internet companies in the red with low sales forced the company to cut back its issue from 5 million shares to 4 million. After the issue, the company's equity stands at 16.4 million shares, pricing it at $164 million.
The issue was led by Donaldson Lufkin & Jenrette and US Bancorp Piper Jaffray.
RadView, which develops load-testing software for websites, is a member of the RAD group. The RadView IPO is the group's second successful exit within a week. On August 4, the Tel Aviv-based wireless equipment maker Giganet (Nasdaq:GGNT) raised a whopping $85 million, selling 5 million shares at $17, way above the expected range of $12 to $14, bringing the company's market cap to more than $400 million.
RadView was established and managed by Alon Kinreich, formerly of Mercury Interactive (Nasdaq:MERQ). Moreover, RadView and Mercury are direct competitors, as Mercury also develops software to test Internet and e-commerce applications. The two companies' products compete in the niche of testing traffic loads on websites.
Load-testing equipment is becoming increasingly essential for e-business, whose fate often depends on the site's convenient availability during traffic-intense periods, such as Christmas and other holidays. Sites without excellent routing capacity often collapse at the very time that sales pressure becomes intense.
Hence RadView's sales have been growing at a significant pace. But the company is still very young, and its sales in absolute terms are small. In 1999 RadView sold $5.1 million and lost a net $2.7 million. Its rapid growth is evidently continuing in 2000. The company reported sales of $2.3 million in the first quarter alone, and lost a net $1 million. RadView has not published its second-quarter results yet, but its prospectus, providing initial data, indicates that sales climbed to around $2.7 million. If accurate, by year-end RadView will have approximately doubled its sales. But its losses are also growing, to about $2 million in the second quarter, double its first-quarter loss.
The company's need to raise capital becomes evident after a glance at its balance sheet. Before the issue, its equity stood at a mere $2 million, and its cash balance totaled $5 million. Moreover, the company has more than 100 employees. It needed money, fast.
The biggest shareholder in RadView is Formula Ventures, of the Formula Systems (Nasdaq:FORTY) group (20% before the IPO, or 2.5 million shares), now worth around $25 million. Computer Associates (NYSE:CA) holds 1.55 million shares worth $15.5 million, in the terms of the IPO. The Zisapel brothers Yehuda and Zohar, the founders of the successful RAD group, hold 2 million shares apiece, and Ilan Kinreich holds 500K shares. Sadot R&D, a venture capital fund that trades on the TASE, also holds 1.5 million shares.
On August 7, another Israeli Internet company, Mind CTI (Nasdaq:MNDO) was disappointed from its Nasdaq debut. The Yokneam-based company raised $30 million at a price of $10 per share, the bottom of its range. It was also forced to reduce its offering from 4.2 million shares to 3 million.
Other Israeli companies whose roads to Nasdaq proved rocky include Netanya-based SmartLink, which which develops software-based communications products for broadband communications; ClickSoftware Technologies (Nasdaq:CKSW) of Tel Aviv; Nogatech (Nasdaq:NGTC) and Camtek (Nasdaq:CAMT). On July 28 Camtek announced that the SEC had accepted its registration statement, and that its IPO would be priced at $7 per share. The company had hoped to float stock at an initial range of $10 to $12 per share.