The largest U.S. initial public offering of all time gained more than 34 percent on its first day.
United Parcel Service (NYSE: UPS) closed Wednesday's trading at 67 1/4, 17 1/4 for the session. Investors looking for a back-door e-commerce stock drove much of the first day gains.
The increase was impressive considering UPS offered a whopping 109.4 million shares. Shares priced Tuesday night at $50, above the proposed price range of $47 to $49. The deal is largest U.S. IPO ever. Morgan Stanley Dean Witter is the lead underwriter with an assist from Goldman Sachs and a host of other firms.
The company said it delivers more than 12 million packages each business day for 1.7 million shipping customers.
UPS eclipsed the U.S. IPO record set last year by Conoco Inc (NYSE: COC), which raised $4.4 billion globally and $3.96 billion domestically in October 1998, according to Thomson Financial Securities Data.
Though the vast majority of UPS revenue comes from deliveries not related to the Internet, some observers view the offering as something of a Web play. Zona Research estimated that UPS delivered 55 percent of the goods purchased over the Internet in 1998.
"At the end of the day UPS is the only way we're seeing anything on our door from the Internet," said William Schaff, fund manager for the Information Technology 100 Fund. "It will be everybody's safe proxy for e-commerce."
For the nine months ending June 30, UPS reported revenue of $19.6 billion and net income of $222 million including charges. For 1998, UPS reported sales of $24.8 billion and net income of $1.7 billion.
Big plans ahead
In its regulatory filings UPS makes its e-commerce intentions clear: "We seek to position ourselves as an indispensable branded component of e-commerce and to focus on the movement of goods, information and funds," said UPS. "E-commerce is an important part of our future growth because we believe that it will drive smaller and more frequent shipments and provide a strong complement to our core delivery service."
UPS plans to leverage tech partnerships for enterprise resource planning, electronic procurement and systems integration. UPS also wants to work with various e-commerce sites to help operate just-in-time or manufacturer-direct distribution business models.
UPS will have to develop a high-tech revenue stream to compete with the likes of Federal Express (NYSE: FDX), which is also going e-commerce. Other competitors include the postal services of the U.S. and other nations, various motor carriers, express companies, freight forwarders, air couriers and others, the company said.