AVNX - - found the answer and thought you might be interested:Avanex Shares Rocket in IPO; Lockup Is to Expire Early
By Beth Kwon and Kevin Petrie
Staff Reporters
2/4/00 7:44 PM ET
SAN FRANCISCO -- Shares of Avanex (AVNX:Nasdaq), a supplier of fiber-optic network instruments, boomed as expected in their market debut Friday. Less expected was the Fremont, Calif.-based company's princely arrangement with its investment bankers.
Avanex officers, directors and backers won from their white-shoe underwriter Morgan Stanley Dean Witter the right to sell another 11.3 million shares just 90 days after Friday's offering of 6 million shares -- provided the stock still trades at about twice its IPO price of 36. Federal rules will limit the individual sales somewhat, based on average trading volume and the number of shares outstanding.
While sometimes warning of concerns among key shareholders, insider selling can also demonstrate strong confidence in an IPO, especially when underwriters allow it to happen before the traditional 180-day lockup ends. By making this unusual adjustment for Avanex, Morgan Stanley has demonstrated a keen eagerness to retain its business. That's a bullish sign.
But Morgan also ensured a modicum of safety for other investors in Avanex by stating that the stock must trade at roughly 72 or higher. That way, investors are less likely to suffer from a flooding of unwanted shares onto the public market.
Morgan Stanley has found "a very creative way to try to get the best of both worlds," says Craig Columbus, president of InsiderSCORES.com, which tracks insider trading for investors. One person close to the transaction says Avanex is a very special case: "In no way is this typical."
Other prized companies have gotten around the lockup before going public, but usually such contracts aren't predicated on stock performance. Officers, directors and backers with Juniper Networks (JNPR:Nasdaq) exacted from their underwriter Goldman Sachs the right to unload as many as 16 million shares following the 4.8 million-share IPO in June, before their six-month lockup expired in late 1999. So far Juniper has proved worth the risk. The stock tripled on the first day and then increased fivefold from that level, finishing at a record 170 Friday.
Avanex's arrangement appears to be "unique," says Bob Gabele, director of insider research for First Call/Thomson Financial. Avanex is still under pressure to perform. "At least there's a formula here," Gabele adds. "If the stock does well, you can sell more" quickly.
Friday was a tremendous start. The stock stunned traders by opening at 170 and jumped up to an intraday high of 200, 456% above its 36 offer price, after raising the price range to 28-30 from 13-15. Avanex finished at 172, chalking the 10th-greatest first-day gain ever, according to Thomson Financial Securities Data.
"I expected the stock to trade near 100," says Vincent Slavin, a sales trader who tracks IPOs for Cantor Fitzgerald. "It did tremendously better than I thought it would. I did not expect this extra 87 points."
The enthusiasm might say more about the sector than about Avanex, which is still too young to boast much of a track record. The 3-year-old company reported $19.8 million in losses on $10.9 in revenue for the six months ended Dec. 31, 1999. Avanex trades at 943 times revenue, more than 80% of which was booked from one of its financial backers, the long-distance telephone company MCI WorldCom (WCOM:Nasdaq).
Avanex's technology crams extra signals into each beam of light on a fiber, and transmits those signals at higher speeds and across greater distances. It's appealing because it will feed an industrywide shortage of fiber-optic network components that is only growing more acute, according to executives with suppliers as large as SDL (SDLI:Nasdaq) and as small as the private start-up Axsun Technologies. Investors attending the Banc of America Securities Technology Week 2000 conference in San Francisco this week consider fiber-optic instruments the key to easing traffic bottlenecks on the Internet. And few doubt the growth of the Internet.
"Bandwidth is an addictive drug," says Catherine Lego, a veteran telecom investor and former board member of JDS Uniphase (JDSU:Nasdaq). "It isn't just a drug that cures something once you have it." Lego formed the Photonics Fund in Woodside, Calif., in December and took an early stake in Axsun.
That's why investment bankers are wagering that an optical stock such as Avanex will maintain its addictive hold on Wall Stree-----------
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