Anil Ambani group firm Reliance Venture Asset Management today announced its exit from France-based 4G chipmaker Sequans Communications, which got listed on the New York Stock Exchange (NYSE) this Monday. Reliance Venture did not disclose the exit returns, though. Reliance Venture invested in Sequans in 2007, along with investors like Alcatel Lucent, Motorola, Societe Generale Asset Management, SwissCom, CDC Enterprises, Add Partners, Cap-Decisif, Kennet Venture Partners, Vision Capital and I-Source Gestion.
The semi conductor design company had a mediocre debut as the shares tumbled 18% on Friday after its initial public offering. The company’s stock closed on the New York Stock Exchange at $8.25 a share, down 17.5% from its IPO price of $10. It sold 7.7 million shares, 1.5 million less than planned, at a price below its expected $11 to $13 range.
According to DowJones, the company’s revenues tripled in 2010 to $68.5 million as the company sold more units. Its loss narrowed to $2.7 million from a loss of $16.9 million in 2009.
Like any semiconductor company, Sequans’ business is cyclical and can fluctuate from quarter to quarter; average selling prices also have a tendency to decline as enhanced products are introduced. The company has never been profitable since it began operating in 2004, and warns it may not ever be. Some of the risks Sequans pointed out in its IPO filing include the fact that the company has a history of losses and indicates that it may never achieve or sustain profitability in the future on a quarterly or annual basis. In addition, the company said it depends on a small number of customers for a significant portion of its revenue. “If we fail to retain or expand customer relationships, our business could be harmed.”
Its exclusive focus on 4G technology could be a hindrance in trying to win new customers, because some wireless carriers already have substantial 3G networks and only want 4G chips that are compatible with their existing networks.
Sequans is Reliance Venture’s first portfolio company to go for an IPO on NYSE and the company also expects to see several more investee companies taking a similar route in the near future, it said in a statement.
“This has been a yet another multi-bagger investment for Reliance Venture,” Harsh Shah, CEO, Reliance Venture Asset Management, said. “We are open to discussing financial information after observing a limited quiet period for 25 days after the IPO,” he added.
Reliance Venture recently exited Dhama Innovations through a secondary sale and is also in talks for exiting several of its portfolio companies as well.
“Our relationship with Reliance Venture is of strategic importance to us as Reliance brings us the operator perspective on the deployment of WIMAX in Asia,” Sequans CEO Georges Karam said.