The online music retailer, which had set a target price of $16 a share, jumped 37.5 percent on the first trade of the day, reaching $22 a share. The stock price remained fairly steady throughout the day, trading between 21-3/64 and 23-3/8, before settling back at 22 by close of market. About 4.4 million shares traded hands.
The company floated out 4.1 million shares, raising a total of $65.6 million. The company increased its offering by 500,000 shares prior to going public, and its target price was upped to $16 a share from a range of between $13 and $15 per share.
CDnow also upped the number of outstanding shares from 15 million to about 15.5 million, according to one of the underwriters for its IPO. Based on 15.5 million shares outstanding, it has a market capitalization of about $342 million with today's closing stock price.
The company has not designated any specific use for most of the proceeds from the sale of its common stock, according to a filing with the Securities and Exchange Commission. Part of the proceeds will be used to repay certain short-term debts, to fund its obligations under its strategic alliances, to finance its sales and marketing campaigns, to make improvements to and expand the capacity of its Web site, to make certain other capital expenditures, to serve as working capital, and to serve other general corporate purposes.
Average daily visits to the CDnow Web site grew to about 132,000 in December 1997, up from 12,000 visits recorded during January of 1996, according to the SEC filing.
In the December quarter, CDnow posted sales of $7.9 million. The company's net sales for last year grew to $17.4 million, compared with sales of $6.3 million reported in 1996. Repeat customers accounted for 50 percent of 1997 sales.
The company posted a net loss of $6.8 million for the quarter, and posted a net loss of $10.7 million for the year, compared with $1.8 million reported for the previous year.
As CDnow invests heavily in marketing, promotion, Web site development, and technology, it expects to incur substantial operating losses for the foreseeable future,. It also anticipates that the rate at which such losses will be incurred will increase significantly from current levels, according to the SEC filing.