UPS...from tonight's online edition of Washington Post
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UPS Surges in Largest-Ever IPO
Dow Jones Business News
Wednesday, November 10, 1999 4:48 PM
NEW YORK -- Shares of United Parcel Service Inc. received an enthusiastic reception in their first day of trading Wednesday, climbing 34% above their offering price in the largest initial public offering in U.S. history.
The New York Stock Exchange-listed shares closed Wednesday at $67, well above the $50 offer price, after opening at $65 and trading as high as $70.313. With a total of 1.2 billion shares outstanding, UPS has a market capitalization of about $80.4 billion, based on Wednesday's closing price.
UPS raised $5.47 billion Tuesday night after the 109.4 million shares it offered to outside investors were priced above the expected range of $47 to $49 a share. Late last week, price estimates on the deal, led by underwriters Morgan Stanley Dean Witter & Co., ranged between $36 and $42 a share.
The sharp jump from the offering price was unusual for a deal of UPS's size. Generally, the large volume of shares traded limits the range in which a stock trades, and underwriters are usually more careful about getting the maximum amount out of proceeds for its company.
Most of the larger premiums in recent months have come from Internet companies, where demand in aftermarket trading by individual investors has proven difficult to gauge.
But UPS was one of the rare cases where conservative institutions and Internet-driven individual investors could find common ground in a stock.
There was "tremendous demand" for UPS from institutional investors, said Vincent Slavin, who tracks new issues for Cantor Fitzgerald Inc.
With its signature chocolate-brown trucks and uniforms, UPS is among the most recognizable companies, with a history dating back to 1907. It is the world's biggest express carrier and package delivery company, employing 330,000 people who deliver about three billion packages each year. It is also one of the larger transportation companies, owning 211 planes and 149,000 trucks.
The size, history and brand make it an attractive holding to virtually any portfolio, analysts said.
But, a large part of the offering's draw - and a big reason for the stock jump when it began trading - was UPS's growing association with electronic commerce. In its prospectus, UPS cites a Zona Research study saying the carrier delivered 55% of the goods purchased online in 1998's holiday season.
That gives investors a safe way to play the e-commerce boom, said Gail Bronson, senior analyst at IPO Monitor. "There's a realization that a major portion of e-commerce in both cyberspace and on Main Street is shipping," she said.
Unlike pure e-commerce companies, UPS is firmly in the black. Last year, the company had revenue of $24.8 billion, for net income of $1.7 billion.
The publicly offered shares represent just about 10% of the company's roughly 1.2 billion shares outstanding. The rest is held by employees, who have been able to buy shares directly from the company or receive them as bonus or compensation.
The $5.47 billion UPS reaped when its shares were priced for institutional investors Tuesday night was by far the largest ever in the domestic IPO market. In October of last year, Conoco Inc. (COC) raised almost $4 billion in its offering and, earlier this year, Goldman Sachs Group Inc. (GS) held a $3.66 billion offering.
More recently, Charter Communications Inc. (CHTR) raised $3.23 billion in an IPO earlier this week.
Until late last week, the expected price range on the UPS IPO was $36 to $42 a share. The $5.47 billion that UPS realized from the offering is nearly double the $3 billion it expected in July, when it first announced plans to go public.
Raising cash wasn't a motivation for the massive IPO, UPS Chairman and Chief Executive James Kelly said Wednesday. Instead, the possibility of future mergers or acquisitions was "one of the primary reasons for developing this public currency," he said.
The company is looking for additional opportunities in Europe, Kelly said. In addition to its widely recognized goods delivery service, UPS delivers information and funds, he said. Kelly said the company will eventually authorize a share buyback.
The CEO also said UPS' relationship with the Teamsters union, which organized a crippling strike against the company in 1997, "is very good and improving." He expects relations to further improve between now and 2002, when the current contract expires.
The increase in the price of UPS stock, meanwhile, is a big boon for employees and other holders of the shares. As of Aug. 19, each share of the company was worth $23.50, reflecting a stock split that is to take place as part of the IPO.
¸ 1999 Dow Jones & |
