Shopping.com leaps in Nasdaq debut
Shares jump over 50 percent. Analysts say the closing price will be key to determining its long-term prospects.
Shares of the online comparison shopping provider opened on the Nasdaq on Tuesday at $22.95. By midday, its shares reached as high as $28.43, more than 50 percent higher than its opening price.
That's after the company saw its IPO price increase by roughly 13 percent in the days leading up to its public offering. Shopping.com's underwriters, led by Goldman Sachs and Credit Suisse First Boston, set an IPO price of 6.87 million shares at $18 per share late Monday, placing the stock at the high end of the investment companies' previous estimates.
The Netanya, Israel-based e-commerce specialist has made a name for itself as a provider of comparative online shopping services, allowing users of its Web site to review product and pricing information from retail sites with which it has partnered. Rather than taking a slice of any related sales for itself, Shopping.com garners revenue by charging its e-tail partners a fee for each person it successfully directs to one of their sites. The company also provides its own product reviews for many of the most popular items users search for via its pages.
Shopping.com is trading on the Nasdaq under the ticker symbol "SHOP."
Analysts said Shopping.com's IPO price most likely grew due to the involvement of German media giant Bertelsmann, the e-commerce provider's largest shareholder before its IPO. According to David Menlow, president of IPOfinancial.com, Bertelsmann's vision and its survival of the late-1990s Internet stock bubble continue to lure investors.
"Bertelsmann coming into the deal is key," Menlow said. "The price range bump certainly indicates that the company is getting its stock to open at a premium and in high demand."
Shopping.com's profitability and increased market interest in "online trading platforms" are likely adding to investor enthusiasm, Menlow said. However, he added, Tuesday's closing price will indicate to what extent investors are willing to buy into the company's long-term prospects.
"We'll find out if (the share price jump) was only smoke and mirrors--if the shares trade down to the IPO price or less by the end of the day," he said.
Comparison shopping has enjoyed a recent resurgence online. Net giants such as Yahoo and America Online are pushing further into the market. In March, Yahoo purchased Kelkoo, a European Web comparison shopping company, for $579 million.
In September, AOL launched InStore, a new comparison shopping site. InStore was developed in collaboration with retail search engine specialist BizRate.com, one of Shopping.com's closest rivals.
Technology companies this year have averaged first-day gains of 14 percent with their IPOs, while first-day gains for all IPOs averaged about 10 percent.
In August, search giant Google captivated the market with its own IPO, ending its first day of trading on the Nasdaq up about 18 percent. The company raised a total of $1.67 billion by going public at $85 a share, but fell short of its top target of raising $135 a share, or $3.6 billion. Google's stock was trading at just over $185 as of midday Tuesday.