Yahoo opened at about 8:45 a.m. PDT and shot up to $43 an hour later, which equals $1 billion for the company. Ten minutes later the stock dropped $10 to around $33, where it largely stayed for the rest of the day as a total of 8.5 million shares were traded.
Yahoo has been the talk on Wall Street and Silicon Valley since it filed for the offering last month, the most closely watch high-tech IPO since Netscape Communications made market history in December.
In spite of investor interest, however, some analysts suggested waiting on the side lines. "Give it time until the large buyers bail out," said Stave Harmon, investment analyst at Mecklermedia. "It's better to wait and watch. Don't jump on the adrenaline ride unless you can handle the free fall."
Yahoo reported a loss of $643,000 on sales of $1.4 million during its first ten months. Its public offering is being managed by Goldman, Sachs and is trading on the NASDAQ market under the symbol YHOO.
The company late last night announced that it would offer 2.6 million shares at $13 each. Yahoo, one of the most popular search engines on the Internet, expects to bring in $32.5 million from the initial public offering.
Some analysts had expected the stock to double today but warned that it would drop just as fast. "I'm expecting it to shoot up and then die down within at least a week," said Manish Shah, publisher of the IPO Maven, a New York-based newsletter. "My recommendation is to stay away from it as much as possible because the outlook is not very good considering what happened with Lycos and Excite," he said, referring to two of Yahoo's chief competitors.
Excite hit the market last week at $17 per share and rose to $21.25 but ended its first day at $20. Lycos went public two days earlier, opening at $16 and shooting up to $29.25 before closing at $21.94.
This morning Excite and Lycos sold at $15 and $18.50, respectively, then closed at $14.50 and $17.
But Yahoo has a better brand name than Excite and Lycos, which is the main reason that so many investors are jumping to get a piece of the popular search engine, Harmon said. "Brand value counts no less on Wall Street than it does on Wal-Mart," he said. "Yahoo has the name and is just starting to build it to be a very significant company in the future."
Yahoo also is largely supported by Softbank, which today boosted its stake in the company by purchasing 37.02 percent of its shares for $108.25 million. In December, Softbank acquired a 5 percent stake in Yahoo. Softbank launched Yahoo Japan this month, a Japanese-language search service that offers about 15,000 sites.
"It makes sense for a company like Softbank to invest in Yahoo, but I don't necessarily think it adds that much value to the company in terms of revenue," Shah said.