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DJ Redback Networks Shares Triple From $23 IPO
Price
By Dunstan Prial
NEW YORK (Dow Jones)--A recent crop of Internet infrastructure companies has stolen
some of the initial public offering spotlight from pure Web deals.
Redback Networks Inc. (RBAK) took center stage Tuesday.
The Sunnyvale, Calif., company makes advanced networking systems that allow for
high-speed access to the Internet.
Redback raised $58 million through the sale of 2.5 million shares at $23 each.
Strong pre-pricing demand from institutional investors allowed Redback and its
underwriters, led by Morgan Stanley Dean Witter, to increase the estimated price range
to $18 to $20 from $12 to $14. Even so, the final sale price was established at a figure
well above the amended range.
The stock has tripled in value in early trading, changing hands recently at 69 on Nasdaq
Stock Market volume of 1 million.
The company's prospectus says Redback's products connect and manage large
numbers of subscribers using all of the current telecommunications technologies, include
digital subscriber lines, which provide high-speed Internet access over existing
telephone, cable and wireless systems.
In recent weeks, so-called Internet infrastructure companies have outperformed their
more high-profile Web-related cousins. For example, shares of Copper Mountain
Networks Inc. (CMTN), which makes parts used in digital subscriber line, or DSL
networks, exploded into the public markets last week, tripling in their first day. And the
stock has held its gains, trading recently at 64 1/8, up 205% from the $21 offering price.
Meanwhile, a much-anticipated offering from online financial news site TheStreet.com
Inc. (TSCM) got off to a promising start, but has since slipped. The stock hit a high of 71
1/4 on its first day, but changed hands recently at 45, a 137% premium to the $19 IPO
price.
Other recent infrastructure companies that have completed successful IPOs include
Covad Communications Group (COVD), NorthPoint Communications Group (NPNT),
and Rhythms Netconnections Inc. (RTHM). All three are building DSL networks.
Analysts say many investors prefer the relative stability of Internet infrastructure
companies to potential-laded but risky pure-play Internet concerns.
Not that infrastructure companies aren't risky. Redback, similar to most of its high-tech
start-up brethren, is losing money. The company reported losses of $3.8 million on
revenue of $6.5 million for the three months ended March 31. During the same period in
1998, Redback lost $2 million on revenue of $478,000.
The company was founded in August 1996 and began shipping its products in the
second quarter of 1998, according to the prospectus. And in a sentence found in virtually
every Internet prospectus, Redback acknowledges: "We have not achieved profitability
and we expect to continue to incur net losses in the future."
The IPO represented a 12% stake in the company. With 21 million shares outstanding
the sale created a market capitalization for Redback of $1.4 billion. |
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