Hello, We continue our last lesson, in that we cover current events. We recall the popularity of the intial public offering (IPO) of the communications company Netscape. Those who had in on the IPO did well, to say the least...
Netscape Communications Corp. took New York by storm yesterday as one of the most successful new stock issues on record. The day saw the new Internet web browser software publisher's shares double in price.
After Netscape completed its 5 million share initial public offering at $28 a share, its stock was selling as high as $75 in Nasdaq trading before falling back to $58.25 a share. Volume topped 13.79 million shares before trading closed.
And, reporting for the Reuter News Service, writer Brendan Intindola says Netscape's rise and slide on the first day "reflects a volatility that will repeat itself in future sessions until a history of performance is established."
Analyst Charlotte Walker of Bear Stearns told the wire service shares will continue to gyrate as the "immature" stock sets a pattern that includes earnings reports, meeting analysts' expectations, finding supportive market makers, and developing a strong institutional following.
Netscape stock commenced trading yesterday moring at 71 then rose to 75. In vigorous afternoon trade, the shares began to slide, bottoming at 55 before rising to close at 58-1/4.
Walker told Reuters, "The valuation defies logic at the moment, but logic may not matter, vis-a-vis the long-term story. But skepticism -- on whether the price is sustainable and if it's worth a $2-billion market capitalization -- is warranted."
Says Intindola, "Despite the huge gap between initial pricing and market valuation, underwriters Hambrecht & Quist and Morgan Stanley priced the deal as best they could, analysts said. They added that the intangible, and massive, enthusiasm for the shares was almost impossible to quantify as of last night, noting the underwriters raised the number of shares offered and the price range several times to match interest."
Reuters says Netscape's debut does not represent the largest first-day gain of an initial public offering, but it does place the technology company among the top 10 IPOs of the past decade or so, a list that includes Home Shopping Network, Tivoli Systems, Enviropact, LA Gear and QVC Network.
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