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VeriChip Launches IPO
Although the provider of human-implantable RFID chips scaled back the size of its IPO, demand for the company's stock seemed fairly strong, with more than 2 million shares trading hands.
Feb 09, 2007—Applied Digital launched the initial public offering (IPO) of its VeriChip division today with a lower-than-expected number of shares: 3.1 million at $6.50 per share—a sharp reduction from its intended 4.3 million shares and at the bottom end of its planned minimum price of $6.50 to $8.50 per share. Trading was moderate (2.2 millions shares traded hands) for the stock offering, which was underwritten by Merriman Curhan Ford, C.E. Unterberg, Towbin and Kaufman Bros.
The stock traded for as much as $6.99 and as little as $6.16, closing at $6.50. Thus, it fared much better than many other stocks trading on NASDAQ market, as reflected by the 1.16 percent drop in the NASDAQ Composite Index.
VeriChip's decision to pare down its IPO isn't necessarily bad news, says Frances Gaskins, president of IPOdesktop, a research firm located in Los Angeles. "At least they're getting it done," he says. Although a reduced number of shares and lower initial price made the offering less attractive, it doesn't mean they can't be successful," he says. "It's a good time for them to go public," he says, referring to a week in which other IPO trading has been heavy. Now that the company has gone public, he adds, "they have a chance now to prove their concept."
In filings with the U.S. Securities and Exchange Commission (SEC), the company reports that a majority of its revenue is derived from sales of its infant-protection systems, which help to prevent mother-baby mismatching and infant abduction, as well as its wander-prevention systems, which facilitate the protection and location of residents in nursing homes and assisted-living facilities. Those systems utilize RFID tags embedded in bracelets to track the whereabouts of individuals.
VeriChip says it believes the global market for infant-protection products is currently growing at approximately 10 to 15 percent annually, although it still considers the market relatively mature. The company claims that approximately 1,100 U.S. hospitals and birthing centers use its infant-protection systems, and that growth opportunities exist among the remaining facilities that have yet to put the systems in place, as well as through the replacement of legacy systems.
In addition, VeriChip estimates that within the United States, RFID-type wander-prevention systems are presently installed in approximately 30 percent of the more than 52,000 U.S. nursing homes and assisted-living facilities. The aging of the U.S. population, it says, combined with the increased prevalence of Alzheimer's disease, is causing nursing homes and assisted living facilities to place increased emphasis on wander-prevention systems.
VeriChip, however, is probably best known for its VeriMed system, which consists of an implantable passive RFID tag the size of a rice grain, which can be injected into a patient's arm. Each tag's unique 16-digit identifying number can be read by hospitals or medical staff carrying a handheld reader and links that patient to medical record details such as allergies, medications being taken and blood type. The VeriMed system is the only human-implantable radio frequency transponder system cleared by the U.S. Food and Drug Administration (FDA) for use for patient identification and health information purposes.
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