United Parcel Service as expected, stormed Wall Street today as investors scrambled to buy into a venerable U.S. company that is now being viewed as an e-commerce player.
UPS raised $5.47 billion yesterday after selling 109.4 million shares at $50 each, the largest amount ever raised in an IPO in the United States.
The shares closed at 67.25, up 17.25, giving the company a market capitalization of $81 billion. Volume topped 80 million shares.
"Obviously e-tail is growing leaps and bounds and UPS will be its carrier," said Anderson & Strudwick analyst Michael Via. "They enable the dot-coms and that makes them one of the largest Internet players."
Via said UPS delivers about 55 percent of all the goods purchased online, a figure that is expected to climb.
At their current prices, FedEx is trading at about 20 times earnings, while the price to earnings ratio for UPS is five times greater, at 108. FedEx has a market capitalization of $16.3 billion, one-fifth the value of UPS.
FedEx earned $631 million on sales of $16.7 billion in fiscal year 1999. UPS earned $1.7 billion on sales of $24.8 billion in 1998.
The difference between the two companies lies in the way their delivery systems are organized.
"UPS is the only company that can effectively deliver to homes because they have the trucks out there," said Thomas Carley, a research analyst at D.A Davidson. "Fedex concentrates mostly on shipping to business."
Known mostly for its chocolate-brown trucks, UPS has 500 aircraft, 157,000 vehicles, and 1,700 facilities for delivering throughout the United States and more than 200 countries.
Executives at UPS said they decided to go public not to capitalize on the Internet frenzy but to make the company more attractive for potential merger and acquisition partners.
In filings with the Securities and Exchange Commission, however, company executives are less shy about their Net connections.
"We have teamed with over 100 e-commerce leaders to offer to our existing and potential customers Web-based solutions that integrate our delivery products and information services into their Web sites," the filing read.
"A key component of our strategy is to expand relationships with technology providers in the areas of enterprise resource planning, electronic procurement, or "e-procurement," systems integration, and others, to integrate UPS technologies into their solutions and into the Web sites and systems of their customers."