Debut performances show investors differentiating (see bold)
By Reshma Kapadia
NEW YORK, Nov 11 (Reuters) - The heat from the sizzling market for initial public offerings did not cloud investors' judgment Thursday as they welcomed new issues much more modestly than the blockbusters seen earlier in the week.
The debut showings confirmed that investors were differentiating between deals, seeking out Internet and technology firms or issues affiliated with well-known names, but remained cautious about companies in other areas without explosive growth targets or strong business models.
Edison Schools Inc. (NASDAQ: EDSN), a private operator of public schools, and ASD Systems Inc. (NASDAQ: ASDS), which outsources e-commerce fulfillment services, struggled to stay above their offer prices.
"I think there is some degree of rationality in the investing world. When we have quality issues like Expedia Inc. (NASDAQ: EXPE) and United Parcel Services Inc.(NYSE: UPS), why invest in some of the others" without name recognition and the right business mix, said Tom Taulli, an analyst at Internet.com, noting the success of this week's high-profile deals.
SonicWALL Inc.(NASDAQ: SNWL) logged the biggest gain of the day's debuts, closing up 12-1/16, or 86 percent, at 26-1/16 after its $14 a share initial public offering raised $56 million. The deal sold 4 million shares at $14, the top of its upwardly revised price range.
The Santa Clara, Calif.-based firm, which provides secure Internet access for small businesses, benefited from the demand for Internet security.
"I like what they are doing even though they're in a competitive market," said Irv DeGraw, research director at WorldFinanceNet.com. "I think they're at the right place at the right time, and this happens to be a good week."
San Francisco-based semiconductor processor maker Sage Inc.(NASDAQ: SAGI) also gained after its $12 a share IPO of 3 million shares raised $36 million.
Shares of the maker of processors for digital displays closed up 9-3/4, or 81 percent, at 21-3/4 on the Nasdaq amid a broad sector rally. Semiconductor equipment makers and chip makers surged with the S&P semiconductor equipment index climbing 5.78 percent to 482.87.
Merrill Lynch boosted price targets on several U.S. and European semiconductor makers, noting the current upswing in spending on computer chips has more years to run.
Online travel service firm ebookers.com plc (NASDAQ: EBKR) did not get as warm a reception as Expedia Inc. (NASDAQ: EXPE) when it debuted Wednesday. However, traders said the London-based firm's performance was helped by Microsoft Corp.'s (NASDAQ: MSFT) Expedia's success.
It priced 3.4 million ADRs at $18. It had initially expected to price the deal in a range of $13-15. Each ADR is equivalent to one share.
Ebookers.com's ADRs, or American Depositary Receipts, closed up 48 percent, or 8-5/8, at 26-5/8 on the Nasdaq after its $18 a share offering raised $61.2 million.
Edison Schools, however, had a more difficult debut. Its shares closed up 1/16 at 18-1/16 on the Nasdaq after pricing 6.8 million shares at $18, below its downwardly revised range. It raised $122.4 million through the deal.
The company, which serves 37,000 students at 79 schools, had initially expected to price the deal in a range of $23-25.
"The sector is consistently getting lousy valuations and it is in an extremely controversial area and is mixing business with politics. There's far too much risk," DeGraw said. "While it may be a good company long-term, I don't need that kind of risk, especially when we have so many other alternatives."
ASD, which runs centers that allow businesses to outsource their operations to the company to automate and integrate Internet sites, raised $40 million after pricing at the bottom of its expected price range.
"While the core business is attractive, it's unclear the firm provides the kind of performance required by the current market," DeGraw said. |
