There was a notable surge in L.A. companies testing the public market at the end of June – and not one of them was a tech unicorn.

YogaWorks Inc. in Culver City and downtown-based RBB Bancorp last week filed documents with the Securities and Exchange Commission declaring their intent to go public, while Hollywood’s Film Finances Inc. began trading on the London Stock Exchange on June 30.

Each of the three IPOs is fairly modest in size – under $100 million – but could be the start to a brisk final six months of 2017 for initial offerings, according to Ernst & Young Partner Scott Porter.

“Some analysts would say maybe we should have seen more IPOs in the first half of the year, so there’s a great opportunity right now,” Porter said. “My sense is that people are more focused and more committed to seeing the process through.”

The global IPO market has been hot: There were 772 public flotations raising more than $83 billion in the first half of this year. Those numbers represent year-over-year gains of 70 percent and 90 percent, respectively, according to Ernst & Young’s report.

L.A.’s IPO dollar volume also rose, but the gain came almost entirely from Snap Inc.’s $3.4 billion offering in March. The only other L.A.-area company to go public in the first half of the year was Brentwood-based addiction treatment company Catasys Inc., which raised $15 million in April.

Porter said company valuations are leveling out, however, and a host of tech companies want to take advantage of the strong 2017 IPO market. That could boost L.A.’s second-half numbers.

“Everyone out there is testing the waters,” he said. “Valuations seem to make more sense right now. As they become more reasonable, there’s more upside and that’s what investors want.”

Big stretch?

The YogaWorks filing did catch certain fitness industry watchers by surprise, despite the positive environment described by Porter, due to its timing.

“In short, I was shocked to see the (IPO filing),” said Brian Smith, a managing director in Piper Jaffray’s consumer investment banking wing.

YogaWorks is just three years removed from an acquisition by Boston private equity shop Great Hill Partners, which paid $45.6 million in July 2014. The company has been growing aggressively – mostly through buyouts of other yoga studios – which has helped revenue but left YogaWorks bleeding cash. The company had 2016 revenue of more than $55 million, up from $48.5 million the previous year, according to its SEC registration, but lost $9.5 million last year and $9.2 million in 2015.

YogaWorks operates 50 studios, more than twice as many as it had in 2012. But the company is still dwarfed by other competitors in the fitness studio market, such as Denver’s CorePower Yoga and Orangetheory Fitness of Boca Raton, Fla., both of which are private companies. CorePower has more than 200 studios while Orangetheory operates more than 500.

Smith said the fitness studio market is a solid play right now because investors have an appetite for retail assets with an experiential component – and yoga in particular is drawing attention due to its huge and dedicated customer base. However, Smith said YogaWorks’ foray into the public sphere might be premature due to its size and market position.

“Yoga is a great end market – large, growing, stable and accessible by all,” he said. “YogaWorks is definitely a solid brand, but I don’t know how it will be received in the public markets, if it gets there at all. I think it’s a tough sell to institutional investors based on the current size, profile and growth strategy.”

That growth strategy includes opening 35 studios over the next 18 months through a combination of location launches and acquisitions, according to YogaWorks’ SEC filing. Sixty percent of the company’s existing studios are acquired locations, YogaWorks said.

Peter Garran, a partner at Great Hill and chairman of YogaWorks, declined to comment on the decision to move forward with an IPO, citing an SEC mandated quiet period.

Great Hill’s push to get YogaWorks on the market is also at odds with trends in the private equity sector.

The data released last week by Ernst & Young says buyout firms continue to pull back on initial offerings for portfolio companies even as the overall number of IPOs ticks up. Only 10.9 percent of companies who went public in the first half of 2017 had financial backers, down from 13 percent in 2016 and 17 percent in 2015.

Porter said that some private companies – particularly in the tech space – are chomping at the bit to take advantage of a resurgent IPO market, but private equity shops have been more patient.

“Financial sponsors have a lot of cash on hand, so they’re not feeling as much need to force an IPO,” Porter said. “They’re looking at M&A deals or just waiting things out in order to maximize value.”

Public finance

Film Finances Inc., also known as FFI, said it raised $74.7 million in last week’s offering.

The company, which provides production guarantees to help independent films secure financing, is part of a growing group of North American companies listing with the London exchange, according to Mark Benhard, a spokesman for the trading venue.

“There have been an unprecedented number of North American companies that have listed on the London Stock Exchange this year,” Benhard said. “Normally, there’s only five or six a year, but we’ve already had 11 this year (including FFI).”

FFI’s filings with the London exchange show existing shareholders are shedding about 25 percent of the company’s stock as part of the IPO, giving those investors a healthy payout. Chief Executive Steven Ransohoff’s 20.2 percent stake in the company has been reduced to 12.8 percent.

Ransohoff said in a statement the funds raised in the IPO would continue to help the business grow and expand into international markets such as China.

“The success of FFI’s institutional placing marks an important milestone in the history of our company,” he said. “Our (London exchange) listing will offer a solid foundation for FFI’s future growth strategy as we expand the scope of our services and global reach.”

RBB Bancorp’s initial SEC filing says its shareholders are set for a nice payday after the firm’s IPO.

The bank, which is looking to raise $82.8 million, is controlled by nine families, all of which have ties to its leadership. That group collectively owns 66.8 percent of the bank’s outstanding shares.

Chief Executive Alan Thian owns the largest individual block of shares, with an 8.4 percent stake. Of the 3 million total shares offered in the IPO, 900,000 are being sold by existing shareholders, according to the company’s SEC filing, which could net them about $24 million.

This type of cash-out is not unusual, according to banking consultant Wade Francis, president of Unicon Financial Services Inc. He said having some liquidity could be important as the family bank grows and some stakeholders get older and want to divest.

What is unusual, Francis said, is an L.A.-based bank opting to go public.

“I couldn’t tell you the last time there was a community bank that went public in Los Angeles,” he said. “It hasn’t happened in years.”

RBB Bancorp Chief Financial Officer David Morris declined comment on the bank’s pending offering, citing the quiet period mandated by the SEC.

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