AthenaHealth Prices IPO Too Low

AthenaHealth is the only VC-backed IPO to price in all of September. In fact, it’s the only PE-backed IPO to price in all of September, as not a single buyout-backed offering has made the cut. Not too shabby for a company that lost over $10 million over the past twelve months, and has only around $80 million in annual revenue.

But that’s where the good IPO news ends – as it seems that underwriters Goldman Sachs and Merrill Lynch left a lot of money on the table.

AthenaHealth priced around 6.19 million shares at $18 per share, which was above its estimated $14-$16 range. But then demand surged, with the stock opening at a whopping $30 per share. As of last check, it was up to $33.89 per share – or 88% higher than where it priced less than 24 hours ago!

It’s probably enough to make AthenaHealth sick to its stomach (“I came down with a case of the lockups”). I’m sure the banks based their IPO price on financial forecasts, but what about institutional demand? Did anyone notice that traders seem to view AthenaHealth more like the next SalesForce than like the next AllScripts (which has 3.5x the revenue and is now trading lower)?

It’s like AthenaHealth is the anti-Blackstone Group — which only priced high because of institutional demand.

AthenaHealth is based in Watertown, Mass., and provides online business services for physician practices. It had raised nearly $50 million in VC funding from Oak Investment Partners (17.3% pre-IPO, 13.7% post-IPO), Draper Fisher Jurvetson (14.8% / 12.5%), Venrock (14.8% / 12.4%), and Cardinal Partners (12.6% / 9.4%). Oak sold 276,085 of its 4.6 million shares via the IPO, while Cardinal unloaded 402,834 of its 3.36 million shares.