New issues post gains amid overall market drop|
May 25, 2000 05:14 PM
By Brian Kelleher
NEW YORK, May 25 (Reuters) - The shares of Thursday's two new issues, Sonus Networks Inc. SONS and Stanford Microdevices Inc. SMDI , managed to post strong debuts while the overall market faltered due to weakness in the financial and technology sectors.
The shares of network equipment provider Sonus more than doubled in value on the Nasdaq, closing up 27-1/2 to 50-1/2, a gain of 119 percent.
The shares of Stanford, a communications equipment maker, closed at 15-3/8 in Nasdaq trading, a gain of 3-3/8 from their $12 offering price.
The Nasdaq composite fell 65.25 points, or 2 percent, to finish at 3,205.36 as fears of higher interest rates caused investors to sell out of their technology positions.
The Dow Jones Industrial Average dropped 211.43, or 2.01 percent, to close at 10,323.92 as analysts came out with bearish comments on the financial sector.
Further contributing to the market fall was a Commerce Department report that preliminary first quarter Gross Domestic Product rose 5.4 percent while economists had expected the figure to be revised down to a 5.2 percent rise.
In a sleepy IPO sector, the success of Thursday's debuts amid a crumbling overall market was a positive sign, but analysts warned that the future of the new issues group is still uncertain.
"The stocks that are in the system - for the most part - need a valuation haircut," said David Menlow, president of Millburn, N.J.-based IPOFinancial.com. "A lot of them are getting them, but more stocks need them."
Until then, Menlow warned, "we're going to get a sloppy market. There are still too many deals in the (pipeline)."
Sonus nevertheless enjoyed a dynamic first day after the company sold 5 million shares at $23 each through lead underwriter Goldman Sachs. With 60.4 million shares outstanding after the IPO, the company ended the day with a market capitalisation of about $3.05 billion.
"I'm pleasantly surprised by their performance," said Corey Ostman, chief technology officer at Los Angeles-based alert-ipo.com, who did warn that today's run-up left Sonus shares vulnerable to short-term profit taking.
Based in Westford, Mass., Sonus sells equipment and software that allows voice services to be sent over flexible networks, which transport data traffic in small bundles known as "packets."
The company posted revenues of about $1.1 million for a net loss of $16 million for the three months ended March 31. Its customers include Global Crossing Ltd. GBLX and Williams Communications Group Inc. WCG
Sunnyvale, Calif.-based Stanford raised $48 million from its 4-million-share offering, which priced at $12 a share, bottom of range, through lead underwriter Deutsche Banc Alex Brown.
"We happen to like the stock, but not for as much as the stock is trading for now," said Menlow. "This deal was priced at the low end of its original range. If the deal is so strong, why is it being priced at the low end?"
Stanford designs and supplies high performance radio frequency equipment components to send and receive voice and data signals. The company finished the day with a market capitalisation of about $392 million, based on 25.6 million shares outstanding.
The company's customers include communications infrastructure equipment makers like Motorola Inc. MOT and MRV Communications Inc. MRVC , while competitors include Agilent Technologies Inc. A
The company reported revenues of $7.26 million for a net loss applicable to common stockholders of over $25.7 million for the three months ended March 31.
The new issues market is scheduled to have a busy Friday, as seven deals are tentatively expected to begin trading.
Wall Street has been anticipating the debut of all-optical networking equipment designer ONI Systems Corp. ONIS in particular, as the price range for the deal was raised to $21 to $23 a share from $14 to $16 a share last week.
"Optical networking is so hot," said Ostman. "ONI should do very well."