In the first initial public offering of 2001, a closely watched IPO from Peet’s Coffee & Tea Inc., an Emeryville, Calif.-based specialty coffee roaster and marketer, will begin trading today after being priced lower than Wall Street’s expectations Wednesday.
Peet’s IPO, the first such deal since mid-December, raised concerns that the IPO market will remain lackluster. Peet’s sold 3.3 million shares at $8 a share Wednesday night, the low end of an already lowered range of $8 to $10.
“Everybody is watching this deal,” said Ben Holmes, founder of IPOPros.com, a Boulder, Colo.-based data firm.
Holmes and other market watchers expressed surprise that the deal was priced so low, given the company’s popularity and what he described as a relatively low debt load and strong financials.
“Our indication was that demand was strong. Everything tells me this is a great business,” Holmes said.
Sharon Smith, spokeswoman for W.R. Hambrecht, the San Francisco investment bank that priced the deal based on its “Dutch auction” process, said the IPO was “oversubscribed,” meaning more investors bid for shares than actually received them. She wouldn’t comment further.
Hambrecht uses a modified Dutch auction process. Investors submit bids over the Internet and by telephone, stating what they want to pay and the number of shares they want to buy. The final offering price is based on the bidding interest.
In a typical IPO, by contrast, the underwriter canvasses big investors as to their interest in a stock, but it is the underwriter that sets the price, not the investors directly.
Hambrecht’s auction process was designed to let more individuals buy IPOs by putting all bidders on a level playing field.
But Hambrecht has had a mixed record pricing deals this way. Of its five IPOs, some, such as Ravenswood Winery, have risen smartly, and others, such as Salon.com, have performed poorly.
Peet’s officials were unavailable for comment.
Formed in 1966 in Berkeley, Peet’s has a loyal following for its specialty coffee and teas. The company has expanded outside Northern California and now has 58 stores, including outlets in Boston and Southern California.
The stock will trade under the symbol PEET on Nasdaq.