Optical Communication Soars After IPO
Optical Communication Products Inc. shares climbed 63% in its first trading day Friday after the Chatsworth-based company raised $115.5 million in an initial public offering, finding demand even amid a slump in other optical-component stocks.
Optical Communication sold 10.5 million shares--a 10% stake--at $11 each through UBS Warburg. That was in the company’s $10-to-$12 range of expected pricing. The stock rose $6.88 to $17.88 on volume of 13.7 million shares. The stock trades on Nasdaq under the symbol OCPI.
Optical Communication’s successful sale, which comes as dozens of young companies scrap their IPO plans, is a precursor to several other fiber-optic companies that are planning IPOs, including Luminent Inc., which also is based in Chatsworth and is planning a sale next week.
“Optical Communication is the big key,” said Irv DeGraw, research director at financial data site WorldFinanceNet.com. “It will be a benchmark deal for optical networking and for IPOs generally.”
Stocks of companies such as Optical Communication that make components for fiber-optic networks plunged Oct. 25 after market leader Nortel Networks Corp. said its third-quarter sales lagged behind expectations, sparking concern that recent buoyant demand may be cooling.
Optical Communication found buyers as rival stocks are tumbling, in part because its shares weren’t expensive, analysts said.
Being profitable for the last five years was another plus for Optical Communication. The company had net income of $16.7 million in the nine months ended June 30, four times its earnings in the year-earlier period, even though revenue rose at a slower rate. Revenue tripled to $69 million.
If Optical Communication hadn’t been able to complete its sale, it might have spelled doom for Luminent, whose losses are widening and revenue isn’t growing as fast as Optical Communication’s.
Investors remain generally wary of most new issues. The 35 companies forced to cancel their IPOs in October outweighed the 23 able to complete sales. And those 23 have returned just 15%, the lowest monthly return in two years.
