Spurred by JOBS Act, iWatt puts in its paperwork

Contact: Thejeswi Venkatesh

Taking advantage of the newly enacted JOBS Act, iWatt recently filed its IPO paperwork in an effort to raise $75m. The power management semiconductor designer has been around since 2000 and has raised more than $50m in venture funding over five rounds. For its next funding, it’s looking to be among the first wave of companies to make it to the public market under the new federal legislation, which lowers the disclosure requirements, among other changes, for IPO candidates. Barclays Capital and Deutsche Bank Securities are co-leading the IPO.

The company has grown at a healthy clip recently, with revenue nearly tripling from $18m in fiscal 2009 to $57m in the 12 months ending March 2012. However, that may not be enough to ensure a warm reception from investors. The concern? Competition. More than 80% of iWatt’s revenue comes from the highly fragmented AC/DC conversion market, where it competes with bigger players such as Power Integrations and Fairchild Semiconductor. The company, which counts Philips and Apple among its customers, says its product has better form factors and lower cost compared to its rivals.

Its chief rival, Power Integrations, currently garners an enterprise value-to-revenue multiple of just over three in the public markets. Slapping the same multiple on iWatt means that the company will debut with a meager market cap of $175m. (Of course, iWatt may well enjoy a premium over its main rival because of its growth rate. Power Integrations flatlined last year and is projected to only grow about 10% this year, while the much-smaller iWatt has bumped up sales more than 60% in each of the past two years.) On the other hand, Wall Street – particularly the big institutional investors – hasn’t shown much demand for any equities lately, much less a new offering from a tiny, unproven startup in a hotly competitive market.