Volcom Shares Soar 41% on First Day
The surf wasn’t the only thing that was up for Volcom Inc. on Thursday.
Shares of the Costa Mesa youth apparel maker soared 41% in first-day trading, the second-best debut this year.
Volcom shares closed at $26.77, a gain of $7.77 from their $19 opening price, after rising as high as $31.20. That added $181 million to the company’s market value, which stood at $625.3 million at the close of trading.
Co-founder and Chief Executive Richard Woolcott, who owns almost 5 million shares, saw the value of his stake rise $38.7 million to $133.5 million.
The strong showing didn’t surprise analysts.
“We knew there was strong institutional interest in the stock,” said Melanie Hase, an analyst with Renaissance Capital, an IPO research firm. “Basically, I think what people are looking at is the growth potential.”
Volcom has that, say local surf shop owners, some of whom bought shares in the offering.
“There’s so much on the stock market that I don’t understand,” said Eric John, owner of Laguna Surf & Sport, a chain of four Southern California stores. “One thing I do understand is Volcom’s success. They’re our No. 1-selling brand.”
Big investors increasingly were attracted to Volcom after the impressive market debut of Zumiez Inc., an Everett, Wash., surf and skateboard apparel retailer that has seen its stock climb 62% since it went public May 6. “The market knows this is a sector that is in demand,” said David Menlow, president of IPO Financial Network in Milburn, N.J. Zumiez shares closed Thursday at $29.15, down $1.42.
Volcom was priced at $19 on Wednesday, higher than the initially hoped-for range of $15 to $17.
Menlow said investors might have been overly enthusiastic about Volcom on Thursday.
“I think there’s an overaction on the part of investors who have been looking at deals that did not have the sparkle of a Volcom,” he said.
Volcom sold almost 4.2 million shares of common stock at $19, according to a filing with the Securities and Exchange Commission, raising about $80 million. Existing shareholders sold an additional 500,000 shares. Volcom intends to use $20 million of the proceeds to repay debts to existing shareholders. The remainder will be used for marketing, upgrading facilities, developing its infrastructure in Europe and other purposes.
Volcom was founded in 1991 by Woolcott and a friend, Tucker Hall, who no longer works for the company but still owns more than 1 million shares. Woolcott’s father, Rene, pitched in $5,000 in seed money and is chairman.
Sales climbed 48% to $113 million last year while profit hit $24.6 million, a 72% jump from the previous year and three times that of 2002.
Richard Woolcott, who did not sell shares in the offering, retains a 21.3% stake in the company. Rene Woolcott, who grossed $5.9 million in selling 310,000 shares, has a 20% stake.
