Investors Bid Up uBid
Shares of uBID rose on its U.S. stock market debut after the Internet auctioneer and Creative Computers' (MALL) subsidiary priced its 1.58 million share IPO at the top end of expectations.
uBID shares opened at $40, sank as low as 34 1/8 before starting to rise again. The stock opened at $15 a share and closed at 48.
Observers said it was likely institutional investors that got an allocation in the IPO flipped their shares once the stock started trading.
"My suspicion is that a lot of those institutional investors got small allocations because this is a very small offering, and they have been conditioned to sell as soon as possible," said Steven Tuen, research director at IPO Value Monitor. "Right now, it's the retail investors driving this stock up."Lead underwriter Merrill Lynch priced the IPO at the top end of the estimated $14 to $15 range. That had already been increased from the initial $12 to $14 range.
Direct marketer Creative Computers is selling about 17 percent of its subsidiary to the public in the offering and plans to distribute its remaining stake in the company (about 7.3 million shares) to its own shareholders sometime in 1999.
Creative's connection to the IPO has been a boon for its stock, which has risen from less than 9 in early November to as high as 63.
When the distribution is made, Creative shareholders will get about 0.7 shares of uBID (UBID) for each share of Creative they own.
But shares of Creative Computers fell 9 to close at 26 1/4.
"When people try to get in an IPO through the back end, this usually what happens. The parent company falls [when the IPO happens] since people's expectations tend to get ahead of themselves," said Ryan Jacob, portfolio manager of The Intenet Fund.
Jacob pointed to USA Network's sell-off Thursday after the debut of Ticketmaster Online CitySearch as an example of this phenomenon.
uBID still relies a great deal on close-out or refurbished computer-related products, many of which it gets from Creative Computers. But it has begun to expand nto new product categories, such as consumer electronics and home appliances. The company said in its prospectus that it plans to expand its product line further, a strategy competitor Onsale has also followed.
Onsale now auctions off sporting goods, office equipment and travel vacations.
"It's very competitive, there are slim margins, and a lot of promotional dollars will have to be spent to build the site to scale," said Jacob, who attended the company's roadshow presentation in New York on Thursday. "It's not terribly attractive."
In other new issues:
For the first time in several months, the IPO market experiences two, small non-technology deals with debuts from air bed manufacturer Select Comfort and upscale restaurateur P.F. Chang's China Bistro.
Written By Darren Chervitz