HomeStore.com Inc (Nasdaq: HOMS) gained 2 3/4 to 22 3/4 Thursday afternooon after it priced 7 million shares at $20 each, the top of its $18 to $20 range.
The company doubled its price range Wednesday despite the poor performance of 1-800-Flowers.com Inc. (Nasdaq: FLWS) and BigStar Entertainment Inc. (Nasdaq:BGST) on this week's morose markets.
The Web site operator had an original target price between $8 and $10 a share for its initial public offering, underwritten by Morgan Stanley.
Analysts had mixed reviews of the deal at the higher offer target. They noted both that HomeStore may be a strong long-term investment -- and that a pending $300 million lawsuit could hurt it more immediately.
"I'm shocked,"Vincent Slavin, an analyst with Cantor Fitzgerald, said about the price increase. "I wouldn't have been shocked to see it raised by a point or two, but to double it in the face of what we've seen in the last three days, I'm pretty surprised."
HomeStore runs four Web sites that provide listings of rental properties and homes for sale. The company generates revenue from the free service by selling ad space on its sites.
"Looking at their site and the prospectus, it's impressive,"said Steve Lacey, editor of IPO Reporter, but "it would be difficult to see this doing extremely well in the aftermarket."
HomeStore posted a 1998 pro forma net loss of $76.8 million, or $1.79 a share, on revenues of $19.1 million, according to the prospectus. For the first six months of this year, HomeStore had a net loss of $50.0 million, or 89 cents per share, on increased revenue of $21.4 million.
Turbulent markets aren't the only thing endangering HomeStores' success; their real estate listings are at the center of a lawsuit filed last week by real estate franchiser Cendant Corp. (NYSE:CD).Cendant claims it signed a deal with HomeStore in 1998 giving the Internet startup access to its real estate listings in exchange for a cash fee and a letter of intent to give Cendant an equity stake. That stake in HomeStore was never given to Cendant, both companies say.
Reuters contributed to this report.