DealZone

Disappointing Bridgepoint IPO brings glimmer of hope to VCs

April 15, 2009

Putting cold water on the idea that the IPO market was beginning to move past its doldrums, at least for fast growing companies, Bridgepoint Education‘s IPO priced 30 percent below expectations Tuesday night, going for $10.50 per share, a far cry from the $14-$16 range the college operator had hoped for.

Bridgepoint broke a short-lived two-IPO streak that saw Mead Johnson Nutrition Co and Changyou.com price at the top of their ranges and soar in their market debuts. And that was despite Bridgepoint’s enviable 150 percent revenue growth in 2008.

Still, Bridgepoint’s IPO brought some hope to venture capitalists, who have had to contend with a 90 percent drop in VC-backed IPOs in 2008, and are looking for an exit for their portfolio companies. Owned primarily by Warburg Pincus, Bridgepoint is the first venture-capital backed IPO since web hosting company Rackspace Hosting’s $187.5 million IPO in August 2008, according to Thomson Reuters.

Part of Bridgepoint’s problem might have been its pricing. Bridgepoint’s valuation was similar to that of rival and fellow recently public university operator Grand Canyon Education Inc., even though as the newest entrant among education stocks, it would be expected to offer a discount.

But Connecticut-based Renaissance Capital analyst Matt Therian told Reuters he guessed Bridgepoint was betting its lower tuition and easier credit transferrability would convince investors Bridgepoint would continue its torrid pace of growth and to pony up. Apparently, investors disagreed.

Still, give Bridgepoint credit for launching an IPO at all in the toughest market in years. (Another three companies have cancelled IPO plans in the past week, including Al Gore’s Current TV.)

The latest test for how much the IPO market is reopening comes Wednesday night when language learning tool provider Rosetta Stone attempts its IPO.

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