--Adds to number of companies that priced within or above range,
traded up on debut
--Demandware leads Thursday's slate with first-day gain of
47.4%
--Comes after rough start to year, with majority of IPOs in
first two months of year pricing below range
(Updates with closing stock price data.)
By Lynn Cowan
Of DOW JONES NEWSWIRES
Pricing on U.S. IPOs continued to show more strength this week
after three deals sold shares within or above their expected ranges
and moved higher Thursday.
E-commerce website-design-software company Demandware Inc.
(DWRE), semiconductor firm M/A-COM Technology Solutions Holdings
Inc. (MTSI), and heavy-equipment transmission-maker Allison
Transmission Holdings Inc. (ALSN) all rose after pricing at the
midpoint of, or higher than their planned ranges. Although Allison
and M/A-COM's percentage gains were in the single digits,
Demandware closed up 47.4%.
Their performance follows a trickle of deals that have had good
first-day receptions after pricing above their ranges: software
company Bazaarvoice Inc. (BV), prototype maker Proto Labs Inc.
(PRLB), and business review website Yelp Inc. (YELP).
Though that amounts to a small set of data points, it's a
hopeful sign U.S. IPOs could be getting their sea legs after a
rough start in January and much of February. Even as the broader
markets rose and volatility declined, investors were more cautious
about buying IPOs in those two months and most deals ended up
pricing below their expected ranges.
Investors certainly are far from being overly enthusiastic about
every IPO, as could be seen in Thursday's performances. While
software firm Demandware rose nearly 50% after pricing above its
expected range, semiconductor company M/A-COM Technology made more
modest gains, closing up 8.2%, after pricing at the high end of its
range. Allison Transmission, a maker of automatic transmissions for
large commercial vehicles, gained 1.7% after pricing at the
midpoint of its expected range.
Cloud-based software applications like Demandware's have been
attracting investors this year, but Demandware's market specialty
and revenue structure was also alluring. The company makes software
that businesses use to design and manage their e-commerce sites,
and counts Barneys New York Inc., Columbia Sportswear Co. (COLM)
and L'Oreal SA (OR.FR) among its customers.
Demandware derives the majority of its revenue through a
revenue-sharing subscription arrangement with its customers, where
customers pay a percentage of their total gross revenue that is
processed on its platform. As part of the subscription, customers
commit to a minimum amount of gross revenue processing, from which
a minimum subscription fee is derived. If they generate more than
the subscription minimum, they must pay additional fees. Such a
pricing model locks in predictable revenue for Demandware while
leaving room for some upside. In 2011, total revenue rose 54% to
$56.5 million, while the company swung to a loss of $1.4 million
from net income of $309,000 in 2010. The company, which has existed
since 2004, has only been profitable in 2010.
-By Lynn Cowan; 202-257-2740; lynn.cowan@dowjones.com