2nd UPDATE: Hyatt Hotels, Ancestry.com Climb Post-IPO

Hyatt Hotels Corp.'s (H) IPO proved Thursday what every hotel operator knows: Even when the industry is full of vacancy signs, people will line up for a bargain rate.

Despite its presence in a sector that is in the middle of an occupancy and rate slump, Hyatt's stock priced within its expected range and climbed 12% higher on its first day of trading.

The deal's early performance provided welcome relief during a rocky period for new U.S. stocks, and was reinforced by a 5.2% gain for a second IPO that launched Thursday, genealogy Web site Ancestry.com Inc. (ACOM).

In the last seven days, two IPOs that were expected to debut in the U.S.--energy company AEI and bank PlainsCapital Corp.--were pulled due to market conditions, and several offerings in recent weeks have priced poorly and traded down on their first days. Recent broad market volatility has made pricing more difficult for IPOs due to investor jitters.

Hyatt's stock closed at $28 a share on the New York Stock Exchange, up from its initial public offering price of $25. All 38 million shares in the offering were sold by the founder's descendants, the Pritzker family, at a price within its expected range of $23 to $26 a share. Goldman Sachs Group Inc. (GS) managed the deal.

The hotel chain, the 10th-largest in the world based on number of rooms, was plagued with investor uncertainty about its offering in recent weeks, but analysts were in agreement that the company's price range represented a bargain. Morningstar Inc. analysts valued the shares at $25, while IPOdesktop.com President Francis Gaskins said the company priced its shares below the company's book value of $29.

Among the positives for Hyatt are its strong brand name, a low-debt balance sheet, and a healthy stash of cash compared to its rivals. Although its room revenue has been in a decline and it has posted a loss so far in 2009, optimists could argue that if investors want to buy a hotel chain at this low point in the industry's cycle, Hyatt is the one to own.

A strong balance sheet "gives them dry powder to strengthen their position strategically. They can be acquirers at time when there are not a lot of buyers out there," said Todd Jordan, a managing director and analyst at Research Edge LLC in New Haven, Conn.

At Ancestry.com, shares closed at $14.20 on the Nasdaq, up from its initial public offering price of $13.50. A total of 7.4 million shares were sold at the midpoint of its expected $12.50 to $14.50 price range, which was set by underwriters Morgan Stanley (MS) and Bank of America Corp.'s (BAC) Bank of America Merrill Lynch unit.

Two more IPOs are expected to trade in the U.S. this week. Solar panel component maker STR Holdings Inc. is scheduled to trade under the symbol STRI, while Chinese printing equipment supplier Duoyuan Printing Inc. will trade as DYP. Both are listing on the NYSE.

-By Lynn Cowan, Dow Jones Newswires; 301-270-0323; lynn.cowan@dowjones.com

(Geoffrey Rogow contributed to this report.)

Ancestry.Com Inc. (MM) (NASDAQ:ACOM)
Historical Stock Chart
From May 2024 to Jun 2024