The Tech World Gets Zapped; Local Innovators Are Paying Dearly For the Stock Market's Slump
Tom Blair, founder and chairman of United Payers and United Providers, a Rockville-based health care financing company, was just one day away from the company's initial public stock offering when his investment bankers delivered the bad news on July 1.</br></br>With the market in a skid, you're not going to get as much as you want for your stock, the bankers bluntly told Blair and his partners. They gave them a choice: Postpone the offering for several months or cut the price.</br></br>Instead of asking $13 a share for the stock as planned, the company cut the price to $11 and on July 2 sold 2.4 million shares. The offering raised $26 million in capital for the company, known as Up and Up, which helps insurance companies provide medical services at lower costs by prepaying hospitals. If the same number of shares had been sold at $13, Up and Up would have raised an additional $5 million, and could have raised even more if the stock had been issued for the $15 to $17 price projected when the issue was planned during the spring stock market boom.</br></br>Whether it's called a correction, a sell-off or the beginning of the end of the longest bull market in history, this summer's stock market slump, which is hitting tech stocks particularly hard, is costing entrepreneurial Washington companies -- even if, like Up and Up, they are not in technology sectors -- millions of dollars.</br></br>The Nasdaq Composite Index -- which consists of the stocks of many of the area's and the nation's fastest-growing companies -- closed at 1,096.68 Friday, down 12.2 percent from its peak this year of 1,249.14 on June 5. The Washington Business High-Technology Index, which includes the stocks of 56 publicly traded tech companies in the region, closed Friday at 23.2, compared with 28.7 on May 1.