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BEHIND THE NEWS: Software maker off target with timing for $86M IPO

August 11, 2008

When it came to timing its initial public offering, ExactTarget Inc. didn't exactly hit a bull's-eye.

The Indianapolis-based maker of e-mail marketing software filed to go public in mid-December, well into the market swoon that began before Halloween.

Since then, the market's only gotten spookier. The S&P 500 has shed another 13 percent, leaving the bellwether index 18 percent off its October high.

Not surprisingly, ExactTarget is stuck at the starting gate. It hasn't moved forward with launching its $86 million IPO, and don't expect it to anytime soon.

Company officials, not wanting to run afoul of Securities and Exchange Commission regulations governing companies plotting IPOs, are tightlipped. ExactTarget has "nothing new to report," spokesman Todd McCall said.

But the IPO market has all but shut down for tech firms, except those with Google-like allure.

Just 40 U.S. companies of any stripe have gone public this year, compared with 130 at the same point a year earlier. Firms backed by venture capital-like ExactTarget-have been especially reticent to take the dive. During the second quarter of 2008, for the first time in three decades not a single venturebacked company went public in the United States.

ExactTarget "doesn't have the glamour people would need to see right now to draw them into technology issues," said David Menlow, president of IPOFinancial.comin Millburn, N.J.

That's not to say the company-which helps clients create and deliver permission-based e-mails-has stumbled.

The company's latest SEC filing, submitted May 28, shows it has racked up 29 straight quarters of revenue increases. In the first quarter of this year, EBITDA-earnings before interest, taxes, depreciation and amortization-was $2.4 million, up from $2.1 million a year earlier.

If ExactTarget had pulled the trigger just a few months earlier, everything would be different.

To drive home that point, company brass need look no further than e-mail marketing rival Constant Contact Inc. The Waltham, Mass., company went public Oct. 2 at $16 a share. In the first day of trading, shares appreciated 79 percent, zooming past $27.

The shares have since retreated but still trade a shade above the IPO price-a respectable showing in a market as brutal as this.

And it sure beats being stuck in limbo. Menlow said there's no telling when the IPO market will rebound. And when it does, the market will have to work through a backlog of companies in the pipeline fighting for investors' dollars.

One option for ExactTarget would be to go an entirely different route-just as locally based Aprimo Inc. did this spring. After pulling plans for a $50 million IPO in April, the maker of marketing software raised $15 million, mostly from existing investors, in a private offering.

Both ExactTarget and Aprimo are proven successes, and neither is at risk of being starved for capital. But if they don't eventually stoke their growth through IPOs, Indianapolis' fledgling tech community will be the weaker for it.

The city has only one major locally based software firm that's publicly traded-Interactive Intelligence Inc. IPOs thrust companies onto the national stage. Two more local firms trading on Wall Street would help shed lingering perceptions that this is a backwater town for the high-growth software sector.

Soft start for shopping center?

Hamilton Town Center opened in Noblesville amid fanfare in early May. But the 950,000-square-foot, $126 million shopping center isn't off to the kind of start that at least one Wall Street analyst hoped to see.

The project is 79-percent leased, according to Simon Property Group Inc., which built the retail center in a 50-50 partnership with locally based Gershman Brown Crowley Inc.

On a July 28 conference call with Simon officials, Goldman Sachs analyst Tom Baldwin called the occupancy rate "a little bit lighter than you'd expect."

Simon officials responded that all is well. President Richard Sokolov said Simon knew it had launched the project "a little early," rather than waiting for additional Hamilton County growth to support it. But he said he was confident occupancy soon would be on the upswing.

"It's a great market," Simon Chief Financial Officer Stephen Sterrett chimed in. "It's hard to believe, but the county that it's in ... is actually one of the 20 fastest-growing counties in the United States."

Hamilton Town Center's anchors include Bed Bath & Beyond, Borders, Dick's Sporting Goods, DSW, JCPenney, Stein Mart and Ulta. It also features a 16-screen Goodrich Quality Theaters megaplex.
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