CurrentOfferings.com Story:

Cogent Up Strongly on Debut

David Shabelman, Sept. 24, 2004

Friday was a good day for Ming Hsieh, chairman and CEO of Cogent Inc. Hsieh, sole owner of the biometrics technology maker, will reap $65.5 million following the company's highly successful initial public offering.

Shares of Cogent, which provides fingerprint documenting and identification software for the government and other law enforcement agencies, shot up 49.8% in their debut on Nasdaq, closing at $17.98 after pricing at $12 on Thursday, Sept. 23.

But while many investors in the offering made out well, they couldn't top Hsieh, 48, who founded Cogent in 1990.

"I've never seen a company go public � and I've looked at more than most people � where the original owner owned 100% at the time of the IPO," said Tom Taulli, co-founder of Current Offerings, a Web site that tracks IPOs. "Every entrepreneur dreams about zero dilution in their company. This guy accomplished that."

Cogent's most prominent customer is the U.S. Department of Homeland Security, which is using the South Pasadena, Calif.-based company's automatic fingerprint identification system to help identify foreign visitors who do not have immigration visas.

The system works by electronically capturing an encoded image of people's fingerprints and running it against a government database of possible terrorists or criminals. A number of government agencies around the world, including the FBI, the Los Angeles Police Department and the European Commission, use the technology to identify criminals.

International Biometric Group predicts that sales of automatic fingerprint ID technology, which includes both hardware and software, will rise to $1.1 billion by 2008 from $415 million in 2004. Among Cogent's competitors are Paris-based Sagem SA, NEC Corp. of Tokyo and Motorola Inc. subsidiary Printrak International Inc. of Anaheim, Calif.

"Cogent is one of the market leaders in a space that's established," said Joseph Kim, associate director of consulting with International Biometric. "Because of that, it's not a surprise to me that they went public and were a success."

Cogent shares were expected to open strongly after the company indicated Thursday that it would raise the price range for its 18 million-share offering to $10 to $12 from $8.50 to $10.50. With demand bubbling, the company then priced at the upper end of the new range.

"This company was a winner from the beginning," said Sal Morrealle, who follows IPOs for Cantor Fitzgerald LP in Los Angeles. "In this day and age, with concerns about terrorism, biometrics is hot. And Cogent makes money."

For the six months ended June 30, Cogent reported revenue of $32.5 million, surpassing the $32.2 million in revenue the company generated for all of 2003. It had net income of $12.5 million for the period, topping its net income of $9.2 million for last year.

Cogent raised $200 million in the offering. In addition to paying out the dividend, the company said it would use the proceeds from the IPO for general corporate purposes, including research and development and potential acquisitions. Morgan Stanley served as lead manager for the offering.