After pricing above its expected range at $21 per share yesterday, Rhythms shares more than tripled, gaining 48.125 to close at 69.125. Today, shares traded as high as 75 and as low as 54 on the Nasdaq composite index.
Separately, Qwest Communications International made a $15 million investment in the company today, allowing the telecommunications carrier to offer Rhythms' digital subscriber lines (DSL)--a technology that allows for fast Internet browsing and data transfers over standard phone lines--in 31 markets.
The multi-year agreement calls for Qwest to be the preferred Web hosting firm for Rhythms. In addition, Rhythms will allow Qwest to house call-processing equipment in its "co-location" facilities.
Rhythms, like other data-focused competitive local phone companies, leases phone wires from the Baby Bells and rents space, or "co-locates," its DSL equipment in their local call switching offices. The company markets its DSL services primarily to small to mid-sized business customers.
Qwest has a similar investment in Rhythms competitor Covad Communications, giving it a stake in two of the top nationwide DSL providers. In January, Qwest announced it would offer Covad DSL in 22 markets.
The successful IPO marks the second for the so-called facilities-based data-focused phone companies this year. The Rhythms IPO comes on the heels of a solid offering by Covad, a fellow "data" or "packet" competitive local exchange carrier (CLEC).
The two offerings will undoubtedly raise interest in the coming IPO of NorthPoint Communications, yet another DSL firm that has filed to go public.
The strong market showings are good news for the nascent, capital-intensive DSL industry. Several other smaller CLECs are pushing DSL, including Dakota Services, HarvardNet, and Jato Communications, among others.
"[The Rhythms IPO] puts us plumbing guys into the category of the content players such as Broadcast.com and eBay," said Brian Gast, chief executive of Jato Communications.