Shares in Perot Systems began trading on the New York Stock Exchange today and the service company's largest customer stands to make a tidy profit off the IPO.
The Dallas-based service company's stock opened at $16 a share today, and quickly climbed to more than $45 per share. The company's initial public offering is 6.5 million shares, up from the expected 5.5 million.
Ross Perot, the billionaire, former U.S. presidential candidate, and a Perot Systems founder, rang the Big Board's opening bell today. Perot twice ran for president as a third-party candidate, representing the Reform Party, which he founded.
Perot Systems' initial public offering promises to bring international banking giant UBS AG $120 million. Through a 1996 contract negotiation, Perot agreed to sell options allowing UBS to buy more than 7 million shares in the company at $3.65 each, according to Securities and Exchange Commission filings.
Perot's stock agreement with Swiss Bank Corporation, which in June 1998 merged with Union Bank of Switzerland to form UBS AG, was part of a deal that enabled the company to nail a lucrative ten-year services contract to manage computers and networks for Swiss Bank's banking and brokerage operations.
UBS now holds nearly 1 million shares and options to purchase another 6.3 million shares at $3.65, according to the SEC filings.
UBS's contract accounted for a quarter of Perot System's business for the first nine months of 1998.
Ross Perot now owns 31.7 million shares of the company. Perot draws no salary, according to paperwork filed with the Securities and Exchange Commission.
Dallas-based Perot Systems had 1997 revenues of approximately $782 million and $724 million for the first nine months of last year.
Perot Systems was founded a decade ago by Ross Perot and former employees of Electronic Data Systems, the world's No. 2 services company. Perot Systems is the sixth-largest provider of outsourced information technology and now competes with EDS, among others.
Perot focuses primarily on four industries: financial services, energy, healthcare, and travel and transportation.
The company is going public after 10 years of private operation, mainly as an incentive to hire and retain employees. "They needed to give them liquidity," said one observer. Analysts said the company has $100 million in cash, has no debt, and no intention of changing its current business model.
More than 90 percent of Perot employees hold equity interests in the company, according to paperwork filed with the SEC.
While the public offering has put the company in the limelight, it's unlikely Perot will be competing effectively against top tier players EDS, CSC, or IBM Global anytime soon, said Julie Giera, analyst with Giga Information Group in Cambridge, Massachusetts.
"They're down on the totem pole," Giera said. "They try to compete on price but they're up against the 400-pound gorilla. Perot is kind of a 'me too.' There's nothing I see in their product offerings or services that sets them off from the top five."