Shares opened at $29, up $12 from the $17-a-share IPO price. DoubleClick (DCLK) sold 3.5 million shares, roughly a 20 percent stake in company, and raised $60 million -- nearly double the money it expected when it first filed to go public in December.
The shares raced higher in their first few minutes of trading, reaching as high as $31.75.
Despite DoubleClick's lack of profits and slim revenues, the offering has been one of the most talked-about deals in IPO circles this year, with audiences of fund managers jam-packed into the company's roadshows, analysts said. The draw was the potentially hot industry of advertising on the Internet.
DoubleClick sells blocks of advertising across many different sites. It also points clients toward specific sites heavily trafficked by their target markets, and buys advertising space there.
On Thursday, the company priced its initial public offering at more than 20 percent above the top end of its target range.
The third major Internet IPO of 1998, following successful efforts by commerce certificate issuer VeriSign Inc. and online music retailer CDnow Inc., DoubleClick offered 3.5 million shares -- 1 million more than its earlier target -- at $17. An earlier target range was set between $12 and $14. The offering will raise $55.3 million for the company after fees.
Pricing above range and expanding the size of the offering are signs of strong demand. Goldman, Sachs & Co. is lead underwriter for the deal. At $17 per share, DoubleClick as a whole is valued at roughly $270 million, or about nine times 1997 revenue of $30.9 million. Founded in January 1996, the company has lost a total of $11.5 million on revenue of $37 million.
Top shareholders after the offering include Chief Executive Officer Kevin O'Connor, 36, with 2.4 million shares; venture capitalists Bain Funds, with 2.2 million shares, and ABS Capital Partners and Greylock Partners, with 1.25 million shares each. DoubleClick's clients include General Electric Co.'s NBC and the Wall Street Journal Interactive Edition, according to its prospectus. NBC is a partner in MSNBC. The Wall Street Journal is a unit of Dow Jones & Co. Inc.
The rich opening premium in DoubleClick shares had been expected but was still viewed skeptically by a few analysts. "This premium does not surprise me," said Vincent Slavin, who tracks IPOs for Cantor Fitzgerald. "But I did not trade a share and I did not want to trade a share. I'd be losing money."
"I'm not surprised" at the premium, said David Menlow, president of IPO Financial Network Corp. "It's a very nervous process for the entire market as we continue to evaluate what the Internet is evolving into. Even with a plethora of Internet companies out there, it's taken very seriously because it can make a material difference to companies using the Internet."
DoubleClick had revenues of $6.4 million in 1996 and a net loss of $3.2 million. Revenues shot up to $30.6 million in 1997, according to the company's IPO filing, while its loss widened to $8.4 million.
The company has grown from 13 employees at March 31, 1996, to 185 at the end of 1997, the filing said. Because it expects to keep investing revenues and planned capital expenditures, DoubleClick said it expects to continue incurring operating losses "at least" through 1999.
The company granted underwriters an option to buy an extra 525,000 shares to cover over-allotments. Goldman, Sachs was the lead underwriter of the IPO.
DoubleClick has said it plans to use the proceeds for general corporate purposes, including working capital and to expand its sales and marketing force and its international operations.
Company officials declined to give interviews.
Contributions from Inter@ctive Week and Reuters