>>NEW YORK (CBS.MW) -- Video game retailer GameStop is getting a warm reception as it rolls out its $325 million initial public offering on Wednesday.
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GameStop (GME: news, chart, profile) opened at $19.25, well above its $18 price. The stock traded flat in the open market at $19.25 on volume of 4 million shares.
GameStop priced its shares in the middle of their $17 to $19 range amid praise from IPO watchers.
The unit of Barnes & Noble (BKS: news, chart, profile) is offering 18 million shares with lead underwriter Salmon Smith Barney, a subsidiary of Citigroup (C: news, chart, profile).
Operating under the store names GameStop, Babbage's Software Etc. and FuncoLand, the Grapevine, Texas-based company posted a 67 percent increase in holiday sales for the nine-week period ending Jan. 10 to $427 million as the largest video game retailer in the U.S. Same-store sales jumped 60 percent.
The company expects to report sales of approximately $510 million for the three-month period ending Feb. 2, up from $327 million, and operating earnings of $37 million, compared to $17 million last year.
Overall, U.S. sales of video games and related hardware reached $9.4 billion in 2001, way up from 1999's record of $6.9 billion, according to NPD.
David Menlow of IPOfinancial.com said in his IPO Pick of the Week column that Grapevine, Texas-based GameStop is tapping into big growth in the video game business on the heels of new game hardware released from Sony, Nintendo and Microsoft.
"Make no mistake about it, the new investors are getting a chance to ride the PC entertainment software wave that appears to not even be close to cresting, but the company is raising $325 million and in the process, giving Barnes & Noble a huge financial windfall," Menlow wrote. See IPO Pick of the Week.
Charles Rotblut of IPOGuys.com said GameStop's appeal comes partly from its dominant position as a video game seller.
"It's the leader within a niche that has attractive long-term prospects," he said. "From a short-term trading perspective, GameStop may not see a material level of upside, though it should receive a warm reception. Several of the stocks within the video game industry, including Electronics Boutique (ELBO: news, chart, profile) and Electronics Arts (ERTS: news, chart, profile), have been range-bound and we believe that GameStop may find itself susceptible to market fluctuations as well."
GameStop is one of a few retailers to tempt the markets of late.
PetCo animal supplies is also expected next week at a price of $18 to $20 in a bid to raise $276 million with underwriter Merrill Lynch (MER: news, chart, profile).
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