In IPO Game, Tag-It Pacific Wasn't Among Winners

In January, Dyne sold the public shares in the downtown Los Angeles firm he built: Tag-It Pacific Inc., a maker of shopping bags, eyeglass cases and leather and paper tags for the likes of Guess and Kenneth Cole. Investors bought a 50% stake in the company, purchasing 1.7 million shares at $4 each, raising $6.7 million.

But Tag-It now has the dubious distinction of being one of the 10 worst-performing IPOs among California-based firms, its stock down 61% last week from its Jan. 22 offering price, according to CommScan, a New York data firm. The stock closed unchanged Friday at $1.56 on the American Stock Exchange.

Tag-It's stock took a nose dive just months after the IPO when it disappointed Wall Street by reporting less-than-expected first-quarter results. The stock still hasn't recovered, although the shares gained about 12% last week after the company posted an increase in new orders from well-known designers and a profit for the second quarter.

"Business is good. We're poised to grow--we've got our financing in place, a New York office and new contracts," said Dyne, the chief executive of Tag-It, which has 75 employees in Los Angeles and 250 in Mexico. Dyne says these days he is trying not to focus too much on stock market movements and is considering several mergers or acquisitions.

"But we're really taking a beating. This is a long-term deal, and I told investors that on the road show," he said.

Tag-It reported revenue of $3.5 million for the first quarter, compared with $4.3 million for the same period a year ago. It reported a loss of $70,263, compared with a loss of $46,901 for the same time last year.

The "slippage in revenue," as Dyne called it, was due to seasonal fluctuations typical for companies involved in the garment industry and part of the company's transition into a "one-stop shop" for the specialty product needs of designers. Dyne cited new orders from clients such as Tommy Hilfiger and Armani Exchange and said the company has an order backlog of $5.2 million, compared with the $2.7 million it had during the first quarter.

But those first-quarter numbers have troubled analysts such as Elizabeth Pierce, who follows the company for Irvine-based Cruttenden Roth Inc., the underwriter of Tag-It's IPO, who downgraded the stock in June to a "buy" from a "strong buy."