Market for Minnesota companies to go public cools off significantly

This year, Minnesota has 78 public companies. That's down from 80 last year, as a red hot equities market cooled off prospects for initial public offerings and other deals.

As a result, after a record period for IPOs in 2020 and 2021, Minnesota companies had to find alternate ways to go public.

The greatest addition of Minnesota public companies in decades occurred from July 2020 to December 2021, when 10 IPOs raised $3.2 billion. The market substantially cooled since then as interest rates rose and backing became much more difficult for newly issued offerings.

The new public companies have consistently traded below their offering prices, with the exception of Eden Prairie-based Agiliti Inc., a provider of health care equipment and repair services.

Prospects not good for 2023

One Minnesota company had registered for an IPO this year but withdrew the offering. St. Paul-based Squarex Pharmaceutical Corp., which is developing a drug to treat cold sores, filed an initial registration in January but pulled its registration May 19. It did ask the Securities and Exchange Commission to reserve its filing fees for a future listing.

The pipeline for a Minnesota IPO in 2023 is effectively empty, but several public companies are set to emerge as spinoffs from Minnesota parent companies and at least two of those will be based in the Twin Cities.

Only two Minnesota companies went public in 2022. Neither of those two companies held a traditional IPO and have not fared much better than companies following a more traditional IPO path.

Minneapolis-based Foxo Technologies in September went public via a special purpose acquisition company, or SPAC merger, which is basically a shell company that looks to purchase an operating company. By the end of the year, Foxo had already ousted CEO Jon Sabes, and its independent auditor in March added a note to the company's Securities and Exchange Commission filings raising questions about its ability to continue as a going concern.

Lifecore Biomedical became public through a November merger with Landec Corp., a California-based public company that took the Lifecore name. The contract development and manufacturing firm has since said it's seeking "strategic alternatives" and received a delisting notice from Nasdaq after it delayed filing its most recent quarterly results. It recently struck a deal to restructure its corporate debt.

The two join the crop from 2020 and 2021. While Life Time Group Holdings shares recently tipped above their offering price, others such as Jamf Holdings, Sun Country and most notably Bright Health have not.

Bright, the Bloomington-based health insurance company, raised $924 million in its June 2021 IPO, at the time the largest ever Minnesota public offering. Now, in a spectacular downfall, it is in danger of being delisted from the Nasdaq stock exchange because shares have persistently traded below $1, off some 95% from the IPO price of $18.

Spinoffs could add to numbers

As far as possible new public companies this year, a big one is 3M's spinoff of its health care business.

3M announced last summer it is going the way of fellow industrial conglomerates General Electric and Toshiba and splitting off the major business by the end of this year. As of April it had not named the spin-off or named a leadership team, but 3M employees have been told it will remain headquartered in Maplewood for a transitional period. A permanent headquarters will be announced later.

The health care business is focused health care IT, bandages, medical devices and oral care and generates $8.6 billion in annual revenue.

Anoka will be home to a new public company with familiar products. Vista Outdoor, currently based in Anoka, is set to split in two by the end of the year. The sporting products segment, which includes ammunition brands Federal, Remington and CCI, will be in Anoka, which Federal has called home for more than a century.

Another new company could be from Medtronic. The med-tech giant announced in October that it plans to split off or sell its patient monitoring and respiratory interventions businesses. The business has about $2.2 billion in annual revenue and 8,000 employees.

Minnesota loses HQs through acquisitions

Minnesota stands to lose some Minnesota-based public companies from pending mergers: