Bridgewater Bancshares leads Minnesota firms entering hot public market for stocks

Bridgewater Bancshares of Bloomington signaled in a registration statement earlier this month with the Securities and Exchange Commission (SEC) that it intends to soon raise around $50 million through the sale of stock to the public.

Bridgewater is part of a rising stock-offering market.

United States IPO activity rose 50 percent to 160 transactions in 2017 amid a buoyant stock market, according to Renaissance Capital, an IPO research service. There is good institutional investor appetite for companies with at least decent prospects in a good economy.

Last year's 160 IPOs were down from 275 in 2014, a postrecession peak, but up from 105 deals in 2016, the weakest year since 2009.

"The market for new equity issuance is strong," said Rick Hartfiel, director of investment banking at Minneapolis-based Craig-Hallum Capital Group. "We are having a record quarter and have been involved with seven new equity offerings since [January].

"Overall, companies are performing and see strong growth opportunities. And investors are looking for good ideas. So the fundamentals of a strong market are definitely intact."

Employee-owned Craig-Hallum has helped raise equity for 150 companies over the last five years and has added offices in Philadelphia and Boston.

Renaissance said last year's IPOs rose in value by an aggregate 26 percent, led by industrial, biotechnology and technology stocks.

And that doesn't count companies that went back to stock investors for "secondary" sales of their stock.

Three Minnesota-based companies went public in 2017: Plymouth-based Celcuity Inc., New Brighton-based Calyxt Inc., and Grand Rapids-based ASV Holdings all completed IPOs.

The three deals raised a collective $92.9 million. It was the most IPOs in Minnesota since 2007, when four Minnesota companies completed IPOs, just before the onset of the 2008-2009 Great Recession.

Bridgewater is one of three local companies already queued on the 2018 IPO on-ramp.

The other two include Roseville-based Securetech Inc., a developer of personal and automobile security and safety devices; and Maple Grove-based Crosscode Inc., which develops cloud-based IT mapping software, all filed initial registration statement.

They all did so under the Jumpstart Our Business Startup Act for emerging growth companies. Signed into law by President Barack Obama in 2012, the measure reduces reporting requirements of small firms of less than $1 billion in revenue.

In addition to those three companies, Eagan-based ConvergeOne merged Friday with a special purpose acquisition corporation also known as a "public shell" with no operations, that means shares of ConvergeOne will trade on the Nasdaq market.

The best known of the Minnesota companies, Bridgewater is a real estate and business lender that has grown fast and profitability since its 2005 inception. Bridgewater also plans to break ground this year on a four-story office building on Excelsior Boulevard in St. Louis Park, including a Bridgewater branch office, retail and restaurant space and a public plaza.

Bridgewater hopes to raise about $50 million, according to the preliminary filing with the SEC. The final amount raised will depend on the number of shares investors are willing to buy, at what price.

Bridgewater raised $10 million at inception from senior management and other investors.

It has since raised $57.3 million in additional equity from Castle Creek Capital, EJF Capital and other institutions.

"We believe our company is one of only a few in the banking industry to have achieved substantial growth while maintaining consistently strong earnings," Bridgewater said in the SEC filing. "We became profitable in our third month … and have achieved monthly profitability since that time."

The company, one of the 10 largest Minnesota commercial banks by assets and deposits, claims stockholder equity of $137.2 million.

Officers and directors of the company, who own 25 percent of the stock, or about 5.3 million shares, plan to sell less than 6 percent of their holdings into the IPO.

Baack, 51, was a federal bank examiner for seven years before entering commercial banking.

A finance and accounting graduate of Minnesota State, Mankato, Baack grew up in Richfield, the son of a truck driver and a homemaker.

Baack, who beneficially owns about 1.1 million shares of Bridgewater, earned about $1 million in cash compensation last year.

Staff writer Patrick Kennedy contributed to this column.