DJ Agere Below Offer Monday After Over-Allotment Exercised
03 Apr 08:15
By Raymond Hennessey
Of DOW JONES NEWSWIRES
(This story was originally published late Monday)
NEW YORK (Dow Jones)--After holding its offering price for several days,
Agere Systems Inc. (AGRA) finally succumbed to selling pressure, ending
Monday's session down 13%.
Since its initial public offering last week, Agere, which was spun off from
Lucent Technologies Inc. (LU), has kept its head above its all-important $6
offering price, though market participants said the stock was being supported
by Morgan Stanley Dean Witter, the lead underwriter on the Agere IPO.
Traditionally, IPO underwriters buy shares in a recent IPO to try to support
the price if the stock sees selling pressure.
But the shares closed down 80 cents to $5.38 on the New York Stock Exchange
Monday. Traders said Morgan Stanley stopped supporting the shares, leading to
the selloff.
A Morgan Stanley spokesperson declined comment, citing quiet-period
restrictions surrounding the IPO.
Agere's close below its offering price - known as "breaking issue" in IPO
parlance - was expected at some point, given the market's continued selloff -
particularly for Agere's competitors in the semiconductor and networking
sectors - and the pressure investors put on Agere's valuation prior to the IPO.
When the deal was priced last week, Agere, based in Allentown, Pa., was valued
at roughly $9.89 billion, far below expectations that the company, which makes
communications chip, could be worth $17.29 billion just after the IPO was
filed.
Some analysts are surprised the break took this long. "I didn't think they'd
close above on their first day," said David Menlow, president of
IPOfinancial.com, a new-issues research firm in Millburn, N.J.
The close came as Morgan Stanley exercised the over-allotment on the IPO,
adding 90 million new Agere shares to the offering,which had originally been
for 600 million shares.
The over-allotment, which allows underwriters to buy extra shares at just
below the offering price, was actually an agreement between Morgan Stanley and
Lucent, wherein Lucent gave Morgan Stanley the new shares in return for $519
million in Lucent debt the firm held.
The value of those shares swapped in the deal now stands at $484.2 million.
-By Raymond Hennessey, Dow Jones Newswires; 201-938-5354;
raymond.hennessey@dowjones.com
(END) DOW JONES NEWS 04-03-01
08:15 AM |
