Shopping.com stock soars
SAN FRANCISCO – The shares of e-commerce comparison site Shopping.com Ltd. surged 60 percent in their stock market debut Tuesday amid signs investors may have renewed affection for Internet companies.
Driven by unexpectedly strong demand, Shopping.com priced its initial public offering at $18 a share Monday night, up from the company’s $15 target. The shares, trading under the ticker symbol “SHOP,” then climbed another $10.80 to close Tuesday at $28.80 on the Nasdaq Stock Market.
Other companies that have completed an IPO this year have averaged a 9 percent gain in their first day of trading, according to Renaissance Capital, a Greenwich, Conn., research firm.
Israel-based Shopping.com, with U.S. headquarters in a suburb just south of San Francisco, raised $80.8 million, after expenses, with its IPO of 5.06 million shares. Company insiders sold 1.81 million shares in the IPO. Tuesday’s rapid run-up in the stock market gave the 300-employee company a market value of $800 million.
Shopping.com has developed one of the world’s most popular e-commerce sites by offering consumers a free service that compares prices Internet merchants charge for various products. The company makes money on referral fees paid by the participating merchants.
Although Shopping.com attracted 15 million unique visitors last month, it’s hardly a household name – unlike other high-flying Internet companies like Google Inc., Yahoo Inc., eBay Inc. and Amazon.com Inc.
The 6-year-old service, originally called DealTime, also is relatively small, with its annual revenue on a pace to reach about $115 million this year.
IPO analyst David Menlow said Shopping.com’s debut appears to be riding on the coattails of Google’s stock, which has more than doubled in value since going public in August. During the first six months of this year, Shopping.com generated 43 percent of its revenue from business links with Google.
“I would put investors in the ‘deer-in-the-headlights’ category right now,” said Menlow, president of the IPO Financial Network. “There are a lot of them who missed out on the Google IPO and now they are looking around to see if there are any other opportunities out there. They are looking for anything to get the sizzle back in the marketplace.”
Google’s soaring stock seems to be lifting the market values of other online businesses. Since Google’s IPO, the Dow Jones composite Internet index of stocks has risen by 16 percent. Meanwhile, the blue-chip Dow Jones industrial average has declined by 2 percent during the same period while the tech-laden Nasdaq composite index has gained 6 percent.
Menlow and other market observers still don’t believe the recent enthusiasm for Internet stocks heralds a return of the irrational exuberance that dominated the late 1990s and precipitated the devastating dot-com meltdown.
Unlike that giddy era, investors are demanding profits from Internet companies, as well as robust revenue growth.
Shopping.com lost $6.6 million through the first half of this year, but has demonstrated it can turn a profit, earning $6.9 million last year on revenue of $67 million. Revenue so far this year has increased by 70 percent.
“Comparison shopping is still in its infancy and the market potential is huge,” said Tamim Mourad, chief executive of PriceGrabber.com, a Shopping.com rival. “That is what investors are factoring into the (Shopping.com) stock price. There are always going to be fears about a mini-bubble forming, but the difference this time is that we are generating real revenue.”
Privately held PriceGrabber has been profitable for four years, said Mourad, who wouldn’t provide specific figures.
Shopping.com declined to comment Tuesday, citing securities regulations that restrict what management can say publicly after an IPO.
The company navigated through its IPO despite a bit of management turmoil.
Nirav Tolia, Shopping.com’s president and chief operating officer, resigned in June after the company received information claiming he had faked part of his educational background and job history, according to documents filed with the Securities and Exchange Commission. The documents didn’t detail Tolia’s alleged fabrications.