Morningstar Shares Rise After IPO

Twenty-one years after Joe Mansueto founded Morningstar Inc. in his Chicago apartment, the mutual fund and stock research company went public Tuesday.

Investors embraced the initial public offering, driving the stock up $1.55, or 8.4%, to $20.05 on Nasdaq. The company sold stock late Monday in an auction-style IPO that priced 7.6 million shares at $18.50 each.

All of the shares were offered by affiliates of Softbank Finance, an arm of Japan-based Softbank Corp., which bought into the company six years ago. The deal raised $141 million for Softbank. Brokerage WR Hambrecht & Co. underwrote the offering.

Mansueto, Morningstar’s chairman and chief executive, also is its largest shareholder and holds more than 30 million shares, or 78% of the total.

Morningstar’s strong reputation as an independent fund- and stock-rating service has been called into question recently by two investigations.

In December, the company disclosed that it had received a subpoena from New York Atty. Gen. Eliot Spitzer related to possible conflicts in the company’s consulting unit -- Morningstar Associates, an investment advisor on 401(k) plans. The investigation focuses on the firm’s ability to offer impartial ratings on mutual funds to clients when it also sells them other services.

Also, the Securities and Exchange Commission has been looking into Morningstar’s failure to properly correct inaccurate data it published a year ago about a mutual fund, the Rock Canyon Top Flight Fund.

The SEC’s enforcement division indicated a year ago that it intended to recommend the agency take legal action for an alleged violation of U.S. securities laws.

Morningstar said in an April 8 regulatory filing that it had cooperated fully with the SEC and engaged in settlement talks but was not able to reach terms. Negotiations have ended, according to the filing.