InfoSpace Backers Temper IPO Volatility
Unlike many Internet companies whose initial public offerings soared on their first day, InfoSpace.com has seen its stock steadily increase--indeed, more than double--since it went public Dec. 15.
The Redmond, Wash.-based firm seemed to make an effort to keep a lid on its stock price during its first day of trading, and the strategy apparently has paid off so far, Wall Street insiders say.
InfoSpace.com, which provides maps, directories and stock quotes for Internet sites, priced its IPO at $15 a share, up from an initial range of $9 to $11. The stock closed at $20 on the first day, up 33%. While that doesn’t compare with opening-day sensations such as Ticketmaster Online-CitySearch, which tripled, InfoSpace.com rose quietly but persistently before leveling off. The stock has eased back slightly this week, closing Tuesday at $33.63 a share in Nasdaq trading.
Executives at InfoSpace and Hambrecht & Quist, the lead underwriter of the IPO, could not comment because the company is in the Securities and Exchange Commission-imposed “quiet period” before and after a stock offering.
Still, according to some Wall Street sources, the deal is different from some recent high-tech IPOs in several ways.
Because H&Q; has a special relationship with Charles Schwab & Co., the brokerage received a portion of the shares to reserve for individual investors.
Before the deal was sold, in order to keep speculation to a minimum, Schwab put InfoSpace.com on a list of companies that customers could not trade over the Internet on the first day. This was to protect customers from the recent trend of “fast-trading,” in which individuals place orders that are not filled until later, when the price has risen far above the level of the order. Customers were allowed to purchase shares only over the phone or in person.
“With these Internet stocks . . . the quotes are often behind what the stock is trading at,” said Schwab spokesman Dan Hubbard, who added that the firm has restricted 25 IPOs so far in December. “Customers may be seeing a quote of $20 for a stock that is already at $55.”
Hubbard said that while some customers were initially unhappy about having to call or visit a Schwab office, since then the firm has received calls from grateful customers who said they were spared grief. Some investors have lost money in IPOs that have fallen back after huge run-ups, including Theglobe.com, which was priced at $9 a share, then shot up to $90 in its first trading day and has fallen to $34.44.
And unlike IPOs that are priced after the market closes and open for trading the next morning to much fanfare, InfoSpace was sold in the middle of the day, catching some online brokerages off-guard.
Some analysts speculated that regulators’ concern about volatile IPOs may have influenced how this deal was arranged.
Other observers said the company wasn’t another “one-day wonder” simply because of doubts about how successful its strategy will turn out to be. For the nine months ending Sept. 30, InfoSpace.com reported a loss of $3.6 million, versus a loss of $366,000 in the year-earlier period.
“InfoSpace has a challenge to meet coming into this marketplace this late in the [Internet] game,” said Gail Bronson, an analyst with IPO Monitor, a data-tracking firm in Calabasas. “They provide content that you can get directly from other content providers.”
