Public Window Slightly Ajar, Analysts Say, After Gaiam’s $30 Million Offering

BROOMFIELD, Colo.—Does natural-lifestyles company Gaiam’s (GAIA) successful

$30 million secondary offering indicate an opening of the IPO window for natural products companies?

Well, yes and no, according to analysts. Gaiam’s offering, with shares priced at $13.75, garnered high interest from the investment community and indeed was oversubscribed. Analysts say that’s because Gaiam, which sells natural, organic and environmentally responsible products, plays on Wall Street in the consumer sector, not in the natural products sector.

“The market is pretty receptive to consumer stock offerings in general,” says Adams, Harkness & Hill analyst Laura Richardson. “We’ve had more IPOs in the consumer space within the last several months than we’ve had in a long time. They’re driven by the relative strength of consumer stocks compared to the overall market this year.”

Richardson says Gaiam’s strong fundamentals didn’t hurt its attractiveness to investors, either. The company posted 2Q01 sales of $22 million, up 48 percent over 2Q00 and a 64 percent increase in net income for the same period.

“We expect lots of that strength to continue through the year, even in the face of a challenging consumer-spending environment,” Richardson says.

As for other consumer-products companies in the natural products space, Tucker Anthony Sutro Capital Markets Senior VP Carole Buyers says look for secondary offerings rather than IPOs. With consumer stocks performing well over the past 12 months, “It’s possible that management can use this as an opportunity to raise capital and pay-down debt,” she says.

IPOs, on the other hand, will be limited because there are few private companies in the space that have revenues greater than $100 million—the magic number for going public, most analysts agree.

“You still won’t see many small companies going public,” Buyers says. “Right now the [IPO] window’s slightly ajar, but not all the way open.”

Adams, Harkness & Hill analyst Scott Van Winkle cautions that Gaiam’s success does not necessarily translate to the wider natural products industry. “Gaiam doesn’t mean anything for the natural products industry because it is generally viewed differently by Wall Street,” he says.

Having said that, Van Winkle remains optimistic about the potential for natural products company IPOs. “Deals can and will get done in the natural products industry this year,” he says.