Investors Seek Nanotech Payday

By David Manners -- Electronics Weekly, 5/24/2004

Google's IPO? Oh please, Internet stocks are so 20th century. Real players are jumping on the nanotechnology bandwagon.

Nanotechnology could see up to half a dozen initial public offerings this year as the venture capitalists sense an exit strategy in an area some analysts consider to be over-invested already. Indeed, the U.S. government is currently spending more than $1 billion a year in nanotechnology R&D programs.

First into the fray is expected to be Nanosys, which claims to have computer-modelling techniques that can design inorganic semiconductor nanostructures like nanodots, nanorods and nanowires. The company is working on product plans with a number of large companies including Intel and DuPont.

Nanosys has already filed its public application for an IPO to raise $115 million, even though it will not have any products until 2006. In anticipates these to include memory chips and displays, though Nanosys stresses that its technology is generic, providing a platform for a wide range of products.

Two other companies; Nanofilm, which has a coating technology, and Nanotex, which makes stain and wrinkle resistant textiles, are poised to follow Nanosys onto the stock markets. If one IPO is successful, bankers expect a rush to market as there are many companies currently operating in nanotechnology. Merrill Lynch, for example, has a nanotechnology index containing 20 companies.

Meanwhile, the federal government has said it expects nanotechnology to be a $1 trillion market by 2015. The 100 year-old electronics industry is only expected to reach the $1 trillion mark this year.

Of course, the 'nano' soubriquet is becoming as popular in new high technology company names as the dot-com tag was at the end of the 1990s. The fear, among serious investors, is of a greed-led nano-bubble.

It's certainly already become a phenomenon among the day trader set, as the nano buzz grows. Late in 2003, when Congress passed a nanotechnology research act that dedicated the aforementioned R&D dollars, Silicon Valley's own representative in the House, Democrat Mike Honda, co-sponsored the bill. In Honda's own words, it is "the next big thing."

Immediately following passage of the  bill, any publicly-traded company that had nano in its name got a boost on the stock market, even if it wasn't involved in the nascent nanotechnology market.

Nanogen Inc., for example, a San Diego-based biotech company that makes molecular diagnostics products for the gene-based testing market, saw its stock jump from $3.79 to as high as $6.40 after the nanotech funding announcement. In the semiconductor industry, integrated metrology supplier Nanometrics Inc., which has the enviable Nasdaq symbol NANO, saw its stock jump from $15.33 to $16.10. The Milpitas company, incidentally, has been around for more than two decades.

Electronics Weekly is the London-based sister pub of Electronic News.

Electronic News editor Jeff Chappell contributed to this report.