Planet Hollywood’s IPO in Orbit
Planet Hollywood International Inc. shot up Friday in the busiest first day ever for a Nasdaq initial offering, while shares of No. 2 online service CompuServe Inc. rose less than recent Internet IPOs on fears about competition.
Planet Hollywood, the restaurant chain whose celebrity shareholder roster includes Demi Moore and Arnold Schwarzenegger, was up $8.875 to close at $26.875 in trading of 22.6 million shares. Earlier, the stock reached as high as $32.125.
CompuServe came nowhere close to duplicating last week’s offering by Internet darling Yahoo! Inc., whose stock more than doubled in the second-busiest Nasdaq IPO. Shares of CompuServe, which ranks behind online industry leader America Online Inc., closed up $3 at $33, after trading as high as $35.50.
Investors said CompuServe failed to attract the reception accorded other Internet-related IPOs because it faces stiff competition and technical challenges. Planet Hollywood managed to attract investors with Hollywood glitz and expansion plans.
“I don’t like either of them long term,” said Ryan Jacob, director of research at the IPO Value Monitor. “They are priced too high in this frothy market.”
CompuServe sold 16 million shares at $30 to raise $480 million. The sale of the H&R; Block Inc. unit represents a 17% stake in CompuServe, valuing the company at $2.7 billion, far less than No. 1 online service America Online’s $6.4-billion market value.
Orlando, Fla.-based Planet Hollywood sold 10.8 million shares at $18 apiece--up from the anticipated $14 to $16--to raise $194.4 million. At the current share price, the company is valued at about $3 billion.
The first quarter of 1996 was the fifth busiest on record for IPOs, according to Securities Data Corp., with 164 IPOs raising a total of $8.2 billion. In April, 40 companies went public, raising $5.1 billion. About 20 more sales are expected to raise another $2 billion before the month ends.
“Investment managers are always looking for somebody that has a stranglehold on a certain market and CompuServe just doesn’t have that so it doesn’t get that big pop,” said Neil Hokanson, fund manager at Hokanson Investment Management in San Diego.
CompuServe faces competition from the Internet and other online services, and earnings will suffer because it plans to spend about $800 million to keep pace with rivals.
Planet Hollywood could fizzle, analysts and investors say, although others said it’s worth buying. Optimists cite the company’s double-digit sales growth, strong management and position as a leading purveyor of “eatertainment”--the idea of combining meals with entertainment.
“It has great sex appeal. It may not last, though,” Hokanson said. “These things always go public when they are at their absolute best and usually get worse from there.”
