VeriSign IPO well-received
VeriSign hits the public market with a bang, raising $42 million as its shares jump 21.4 percent on its first trade of the day.
The company raised $42 million as its shares jumped 21.4 percent to 17 per share on its first trade of the day, up from its target price of 14 a share. But the momentum didn't end there. VeriSign stock kept on climbing to end at 25-1/2, up just over 82 percent from where the stock was priced. Volume today was 4.56 million shares.
The leading provider of digital certificates on the Internet floated out 3 million shares with a market value of $282.1 million, based on its target price.
VeriSign apparently got a strong response from institutional investors. Initially priced between 9 and 11 a share, the company yesterday raised its range to between 11 and 13 a share.
According to its SEC prospectus, VeriSign will use $5 million of the IPO proceeds to fund capital expenditures this year. The remainder will be applied to general corporate necessities, such as working capital, as well as to acquisitions and investments that have yet to be planned or undertaken.
Securities Data analyst Richard Peterson said VeriSign would be floating its offering under mixed market conditions. On the one hand, he called this month "one of the worst Januaries for IPOs in the last decade." On the other hand, he said that the dozen tech IPOs that have been launched since December have shown an average gain of about 13 percent in the first day of trading, and nearly 30 percent appreciation through Wednesday.
"The IPO market has been weak as of late, and that's a negative for VeriSign," said Peterson. "But tech IPOs have been doing well. That should give them a little more momentum."
VeriSign revenues and losses have grown substantially over the past three years. In 1995, the company lost $2 million on revenue of $382,000. In 1996, the net loss was $10.2 million on revenue of $1.4 million. And in 1997, the loss was $19.2 million on revenue of $9.4 million.
For the quarter that ended December 31, 1997, the company lost $6.5 million on revenue of $3.3 million. For the same quarter a year ago, its loss was $4.3 million on revenue of $577,000.
VeriSign's major competitors are Entrust Technologies, GTE CyberTrust Solutions, and IBM, in addition to a number of smaller competitors. Large companies such as Netscape also have dabbled in Internet identity authentication.
Digital certificates are like driver's licenses on the Internet. They are used for secure email, credit card purchases, and other financial transactions, and also for access to sensitive information or subscription-only services.