The pace of initial public offerings in the physician practice management industry picked up in 1997, as did the performance of those stocks, according to a survey by Advest's Boston-based healthcare group.
Six PPMs, not including dental-care companies, went public in 1997, raising $227.5 million, according to the investment bank's survey. AmeriPath, a Riviera Beach, Fla.-based pathology PPM, was the largest deal at $89.6 million.
The total dollars raised were up 25.6% from 1996's total of $181.1 million on four IPOs, including West Palm Beach, Fla.-based PhyMatrix Corp.'s $123.3 million deal. However, PPMs in 1997 only raised half as much as their counterparts did in the hot IPO year of 1995, when nine PPMs, including MedPartners, raised $545.4 million.
With Wall Street's infatuation with PPM IPOs at its peak in 1995, it isn't likely that year's total will be matched again any time soon, according to Chip Linneman, who leads Advest's healthcare group. Linneman says he expects 1998 to start off slowly for PPM IPOs but pick up after mid-year, assuming the stock market overall remains strong. Four PPMs that filed their IPOs in 1997 are still waiting to go public.
"I think the markets are going to be cautious," Linneman says. "The big issue that investors have with PPMs is, are they creating value or are they consolidators? They're looking for more of a balance between internal and acquisition growth. They're going to be fairly discerning."
A rebound in PPM stocks that sent prices up 30% between May 1997 and year's end helped bring the value of the IPOs up 16.6% for the year, Linneman says.
Specialty Care Network, an orthopedics PPM, led all IPOs with a 70.3% price increase (see chart). The largest decrease was an 11.5% decline by Dallas-based radiology PPM American Physician Partners.
In 1996, the average year-end price of PPM IPOs overall fell 8.1% as the sector was in the midst of a year-long slump that sent prices down 40% between the first quarter of 1996 and the same quarter in 1997.