DDi Corp. Shares Drop 20% in First Day of Trading

Shares of DDi Corp. fell nearly 20% Tuesday on the first day of trading for the Anaheim printed circuit board maker as Wall Street took a more skeptical look at companies going public and at technology stocks in general.

DDi’s stock dropped $2.75 a share to $11.25 after the company raised less than it had expected in its initial public offering.

The company sold 12 million shares late Monday at $14 each, raising $168 million. But it had planned to raise as much as $82 million more by selling 14.7 million shares at $15 to $17 a share.

But DDI wasn’t alone.

Another new stock, HealthStream Inc., an online health-care training firm, also slipped a bit in its first day of trading as investors fled overpriced technology stocks and drove down the slumping Nasdaq Composite Index 132.3 points, off nearly 20% from its March 10 record high.

The Nasdaq’s decline has sent investors to better-known companies, analysts said, while a record $22.6 billion in IPOs in the first quarter drained investors’ funds.

“It’s hard for IPOs right now,” said Todd McClone, senior analyst at Strong Capital Management. “When people get nervous, the first thing they kick out the door are companies they don’t know.”

The Dow Jones industrial average rallied as investors snapped up cheaper industrial and consumer shares, including Alcoa Inc. and Minnesota Mining and Manufacturing Co. International Paper Co. rose after it reported profit that beat expectations.

“This is a flight to the sales rack,” said David Sowerby, who helps oversee $8 billion at Loomis Sayles & Co. in Bloomfield Hills, Mich. “Investors are looking for stocks that have lower average [price-to-earnings ratios] that have a quality earnings history as well.”

The poor performance of IPOs also has dampened enthusiasm. As of Tuesday, almost 60% of the companies that sold stock for the first time this year traded below their issue prices, according to a Bloomberg News analysis. Six companies that traded for the first time on Friday dropped in trading Tuesday.

“I’m spending my time now looking for quality companies that I’ve wanted to own,” McClone said.

IPOs had been strong even in the face of market slumps, but their first-day performances are beginning to suffer. Underwriters looking for signs Tuesday that the trading environment had improved were largely disappointed.

HealthStream lost 50 cents to close at $8.50 a share, but its initial $9 price was well below the $11-to-$13 range the Nashville company had anticipated.

DDi, which operates Dynamic Details Inc. and targets the rapidly growing communications and networking equipment industries, took the biggest hit among new IPOs.

Analysts had wondered whether the company would have much appeal to investors because it is highly leveraged and has accumulated losses of $82.9 million since 1997.

DDi’s debt load grew with two major acquisitions over the past two years, but its revenue and customer list also grew. Among the company’s 1,400 customers are Nokia Corp. and Motorola Inc., the world’s No. 1 and No. 2 makers of cellular telephones, and Cisco Systems Inc., the largest manufacturer of computer networking equipment.

Analysts are split on whether the company is well-positioned to take advantage of strong overall growth in the circuit board industry.

Bloomberg News and Dow Jones Newswires contributed to this report.