Colorado’s loss of corporate giants like Qwest Communications and First Data creates pressure for its younger public companies to come off the bench and perform.
Their batting average in that regard looks good so far, according to a Denver Post analysis of stock returns for more than 700 U.S. initial public offerings since 2005.
About 16 Colorado companies that went public after 2005 are still trading. That group isn’t large, but four of those firms rank among the top 20 for market return since going public, according to data from Bloomberg.
Chipotle Mexican Grill is the top performer of any U.S. company to go public since 2005, with a tenfold return since its January 2006 IPO.
“I am still most excited about how can we change food culture in this country,” said founder and co-chief executive Steven Ells.
Chipotle has built its brand on providing fast food from high-quality ingredients raised in ways that are environmentally friendly, Ells said. And it has avoided crashing and burning like Colorado’s other famous IPO — Boston Chicken.
Other top performers from Colorado include Englewood information and analysis firm IHS, up 457.6 percent; ambulance provider Emergency Medical Services of Greenwood Village, up 353.9 percent; and Molycorp, a mining company that has risen 278.4 percent since its offering in July.
IHS chief executive Jerre Stead said the company surveys 400,000 customers every year to get their take on how it is performing and responds accordingly. The company also kept a long-term perspective during the downturn, avoiding salary and benefit cuts and continuing to provide shares to “colleagues,” as employees are called.
That has allowed IHS to boost profit margins at a time when competitors who cut aggressively and then reversed those cuts and now find their margins under pressure.
“We set high targets for the future and work backwards,” Stead said. “If we do all that, I know where the share price will be.”
Metro Denver rivaled northern California for producing strong public companies in a difficult market, although it can’t match the Golden State for the sheer volume of companies launched.
“Proximity to major research universities and access to venture capitalists creates favorable conditions for start-ups, providing a deeper pipeline of potential IPOs in a certain geographic area,” said Matt Therian, a research analyst with Renaissance Capital, an IPO research firm in Greenwich, Conn.
But at the end of the day, long-term outperformance comes down to a company’s business model, where it is at in its growth cycle and pricing the offering correctly, he said.
And it isn’t enough just to incubate winners. Colorado will need to find a way to keep them around.
Already, one of the four top performers, Emergency Medical Services, is being taken private in a $3.2 billion leveraged buyout. After First Data went private in a buyout, Denver lost its headquarters to Atlanta.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
