IPO investors gave a relatively decent reception to Wit Capital (Nasdaq: WITC) on Friday.
Shares of the online investment bank rose as much as 77 percent to 16 in late morning trading. Wit was at 15 1/4 shortly before midday, on volume of more than 6 million. The company priced its 7.6 million share offering Thursday night at 9, the high end of its range.
Wit Capital is known among online investors as an e-manager for some initial public offerings. Wit has opened 41,000 accounts, participated in 70 IPOs and boasts 38 million page views a month. For 1998, Wit reported a net loss of $8.8 million on revenue of $2 million. For the quarter ending March 31, the company reported a loss of $4.9 million on revenue of $3.9 million.
As of March 31, Wit had cumulative losses of $18.5 million. The company said it will continue to incur net losses at least through Dec. 31.
Wit said it will boost expenses to expand its investment banking and sales and marketing operations and enhance its online services.
On the plus side, Wit is aligned with Goldman Sachs, which has the option to own up to 25 percent of the company. Goldman currently has a 16.7 percent stake in Wit. The company also has agreements with 22 online brokers, which collectively account for 29 percent of online trading volume.
The risks cited by Wit include: the ability to work with other investment banks, the inability to get enough IPO shares, and the failure of its e-dealer network to be adopted. Currently, only two of its 22 e-dealer clients have the technology to handle electronic offerings.
Wit's competition -- E-Trade (Nasdaq: EGRP), DLJ Direct (NYSE: DIR) and Charles Schwab (NYSE: SCH) -- is formidable.>