Berg 'toughs it out' in rough VC seas

Electronic News, Feb 23, 1998

St. Louis, Mo.--Connector manufacturer Berg Electronics Corp. knows about timing.

While its March '96 IPO went through smoothly, the Asia/Pacific situation "blew up" in the middle of Berg's secondary offer "road show." The company turned lemon into lemonade, however, seizing the opportunity to address large numbers of potential institutional investors regarding its position in the midst of wildly gyrating world markets.

Finding itself in front of "as many institutional investors as we could muster," Berg took special pains to explain that, in its case, Asia/Pacific would not present particular problems. "We were affected by the market volatility as well, but once the investors understood that Asia/Pacific was not going to have as adverse an effect on us, the stock price came back and we were able to conclude the offer," said Gary Strong, director, investor relations.

The secondary offer was initiated in November of '97 and completed about two weeks ago.

Asia/Pacific was "a top-of-mind issue," said Mr. Strong. "We spent a fair amount of time on it. It blew up in the middle of the road show. We toughed it out. We completed the show so that we were in front of as many institutional buyers as we could muster, and then held off on the pricing until after the market settled down."

Donaldson Lufkin Jenrette then came forward and bought the entire secondary (about 10 million shares) to sell to its customers.

Berg wanted to complete the offer because it "improved liquidity very substantially" and that "has tremendous appeal" to institutional investors. "The fact that we postponed the pricing said that with the market so volatile, we weren't going to give the stock away. Postponing the pricing was the equivalent of a temporary withdrawal, but we left it in registration," he added.

The company's shares were priced at $21 at the IPO but have since split. "We have gone from the equivalent of $10.50 at the time of the IPO to about $26 today."

Infoseek Corp., a $35 million services company offering search and navigation of Internet sites (competitor Yahoo!), went ahead with its secondary offering despite "some reticence around the market as a whole." Said Doug Free, director, corporate communications, "We may not be growing as fast because of reticence around the market as a whole, but we have not had the same fluctuations as some of the capital markets, where people are making hardware products, for example."