DDi Strategy to Reduce Its IPO Stock Sale Pays Off

DDi Corp. Chief Financial Officer Joseph Gisch won’t deny the timing was bad: The Anaheim maker of printed circuit boards went public the same week the Nasdaq Composite Index staged its biggest five-day drop.

Gisch and DDi’s executives pressed ahead with the initial public offering in the hope of creating a currency to lure and keep employees and make acquisitions.

On the advice of bankers at Credit Suisse First Boston and Robertson Stephens Inc., DDi cut the stock sale by a third to $168 million to attract investors.

DDi succeeded, and investors have since doubled their money. The shares, which were priced at $14 on April 11, hit a record $31.25 Friday in Nasdaq trading.

“The shares were a bargain,” said Gisch. The IPO “wasn’t as high as our expectations were, certainly, but it was a range we could live within and we felt it was important to go ahead.”

The second quarter, while tough for companies, proved a boon for those investors who kept their doors open to new issues. The 89 IPOs in the quarter, including DDi, returned 76% through the end of June, according to CommScan LLC. That compares to a 10% return from first-quarter IPOs.

The main reason for the gains, analysts and investors said, was value. Almost half the companies going public in the last three months were forced to cut their offerings, reducing the value of the company and key ratios such as price-to-revenue.

“The best time to buy IPOs is in a tough market,” said Bill Brady, head of technology banking at CSFB. “If any underwriter decides to do a deal, it’s going to be their best deal and it’s going to be really low on price.”

Take DDi, a company that makes circuit boards that others design, helping reduce the amount of time it takes to move a product from its concept to production.

Gisch and his colleagues at DDi forfeited as much as $80 million by cutting their offering to entice investors. They sold 12 million shares at $14 compared with the 14.7 million shares they had planned to sell at between $15 and $17.

“With what was going on in the market, it was hard to get anyone as excited as we would have liked,” Gisch said.