It was a remarkable
debut. Chinese search engine Baidu.com's shares sold
in the United States for US$27 ($39) - then surged
on day one to close at US$122.54 ($177.46).
Friday's result was
the biggest first-day gain for a new listing in the US
for five years.
more than quadrupled their money.
An analyst in
New York with IPOdesktop.com, a website devoted to
initial public offerings, John Fitzgibbon, said: "This
one is the return to the internet bubble. Last time we
saw a deal skyrocket was during the frothy IPO markets
of 1999 and 2000."
Then came the
Some analysts said
the internet search engine could have had an even better
payday for itself if underwriters had sold the deal at
a higher price to begin with.
"It looks to
me like the underwriters should have had a better indication
of the appetite for this stock than they did," said
Donald Straszheim, president of Straszheim Global Advisors.
eager to own a stake in a company that many say could
grow as dramatically as Google and is based in a country
itself undergoing explosive growth.
But other analysts
are not so sure the underwriters made a mistake, given
that the company's shares were priced at a relatively
high multiple of revenues.
"It wasn't priced
out of line with the rest of the market. In a situation
like this, you're dealing with the unpredictability of
the after market," said Tom Taulli, of Instream Partners
in Newport Beach, California.
At issue is the
underwriting process. Banks selling shares to the
public - in this case Credit Suisse First Boston, Goldman
Sachs, and Piper Jaffray - are paid to use quantitative
models to determine a fair price for shares, but also
to gauge investor demand.
both subjective and objective elements, making definitive
evaluation of a bank's performance difficult. In this
case, demand for the IPO was evidently outsized, but so
were the unknowns for the company.
"We don't know
the potential impact of censorship in China, or how quickly
the internet will grow there," said David Menlow,
president of IPOfinancial.com. Had the IPO been priced
higher and then fallen in the first day of trading, investors
could have sued.
and chief executive Robin Li, speaking on CNBC, said
he was not upset by the potential lost proceeds of the
IPO because the company had only sold a small portion
of itself, and had significantly more growth ahead.
of Florida Professor Jay Ritter, an IPO expert, said
Baidu.com left money on the table by introducing the shares
at a level well below where they ended hours later.
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