How Acia Is Cashing In Huge

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Acacia Communications Inc. (NASDAQ: ACIA) had one of the hottest initial public offerings of the year so far, with the stock more than quadrupling since its IPO. However, the stock has pulled back recently on news of a secondary offering.

A secondary offering after a stock has jumped massively is one way for companies (or selling shareholders) to literally cash in on their success. Although they are diluting shareholders, they are hitting a significant payday. In some cases having a secondary offering may send the price lower, but in this case the company is looking to fund its continued growth, so investors and analysts are bullish on where Acacia can go from here. The stock has a consensus analyst price target of $114, basically over a 10% premium on the current price level.

The company announced the pricing of its follow-on public offering of 4.5 million shares at $100 per share, with an overallotment option for an additional 675,000 shares. At this price the entire offering is valued up to $517.5 million.

The offering consists of 1,210,302 shares from the company and 3,289,698 shares from certain existing stockholders.

Keep in mind Acacia Communications currently has a total market cap near $3.7 billion.

The underwriters for the offering are Goldman Sachs, Merrill Lynch, Deutsche Bank, Morgan Stanley, Needham, Cowen, William Blair and Northland Capital Markets.

In terms of its finances, Acacia detailed in its filing:

We have experienced rapid revenue growth over the last several years. Our revenue for 2015 was $239.1 million, a 63.5% increase from $146.2 million of revenue in 2014. Our revenue for the six months ended June 30, 2016 was $200.7 million, a 91.0% increase from $105.1 million of revenue in the six months ended June 30, 2015. In 2015, we generated net income of $40.5 million and our adjusted EBITDA was $47.5 million, compared to net income of $13.5 million and adjusted EBITDA of $20.4 million in 2014. For the six months ended June 30, 2016, we generated net income of $32.2 million and our adjusted EBITDA was $52.6 million, compared to net income of $9.0 million and adjusted EBITDA of $17.7 million for the six months ended June 30, 2015.

Looking back at its IPO in May, the company priced its 4.5 million shares at the high end of its range of $21 to $23 per share. At this price, the entire offering would have been valued up to roughly $119 million. However, the stock actually entered the market at $29, well above the set price. Since that time, the stock has risen to over $125 per share.

Shares of Acacia were last seen down 6.4% at $103.00, with a 52-week trading range of $27.05 to $128.73.