Zillow Surges on First Day After Pricing IPO Above Range
Stock Chart for Zillow Inc (Z)
Zillow Inc., an online real estate information service, surged in its trading debut after selling shares above an increased price range in its initial public offering.
The Seattle-based company’s stock, trading on the Nasdaq Stock Market under the symbol Z, climbed 79 percent to $35.77 as of 4 p.m. New York time, after earlier tripling to $60. Zillow raised $69.2 million yesterday selling 3.46 million shares at $20 apiece, above the offering range of $16 to $18.
Zillow joined website operators such as LinkedIn Corp., Yandex NV and HomeAway Inc. in gaining at least 49 percent in first-day trading after IPOs this year. Investors are flocking to a limited number of Internet offerings after some of them have far outpaced the average gain of about 7 percent in all U.S. IPOs in 2011, according to data compiled by Bloomberg.
“This is another one of those deals which are unique and which are in high demand, at least for the time being,” said Josef Schuster, founder of Chicago-based IPOX Schuster LLC, which oversees about $2.5 billion. “Based on how HomeAway and LinkedIn have been doing, I think there was a lot of indiscriminate participation in this deal.”
LinkedIn gained 124 percent through yesterday since its IPO and HomeAway’s stock rose 53 percent.
Zillow, whose website allows home buyers, sellers, renters and managers to list and search for properties, home-price estimates and other information, saw sales more than double to $11.3 million in the quarter ended March 31. The net loss in the same period narrowed to $826,000 from $2.8 million, its IPO prospectus showed.
At the IPO price, Zillow’s market capitalization was about $540 million, based on the total number of shares outstanding following the offering. The company also completed a $5.5 million private placement to existing investors that may have a small effect on the total number of shares.
That market value makes Zillow much smaller than professional-networking site LinkedIn or Internet-radio site Pandora Inc. were when they completed their IPOs earlier this year. LinkedIn’s offering valued it at about $4.3 billion, and Oakland, California-based Pandora’s IPO gave it a market value of about $2.6 billion.
For buyers in the IPO, Zillow was also cheaper. At $20 a share, Zillow was valued at about 12 times 2011 sales, assuming revenue for the first quarter holds true for the rest of year. That compares with ratios of 26 for LinkedIn, 13 for Pandora and 16 for HomeAway, as of yesterday’s closing share prices.
In May, 22 million unique users visited Zillow through its website and mobile applications, more than double the number a year earlier. Zillow’s sales growth will attract investors even though the company isn’t profitable, said Francis Gaskins, president of IPODesktop.com, in an interview today.
“They showed incredible quarter-to-quarter growth going into the IPO, and I think that internal growth can be maintained,” Gaskins said. “The market is super hungry for companies that can have a high internal growth rate in this flat-lined economy.”
Zillow raised 43 percent more in its IPO than it originally sought. The company increased the price range after initially proposing to sell the shares at $12 to $14 each. Citigroup Inc. (C) was the lead underwriter for the offering.
LinkedIn, based in Mountain View, California, more than doubled in its May 19 debut after raising $352.8 million in its IPO. HomeAway, the Austin, Texas-based operator of a vacation- rental website, surged 49 percent on June 29, the day after its $216 million IPO.
“Companies like Zillow, with a very attractive growth profile, with revenue growing over 100 percent year-over-year, are being received very warmly by investors,” Zillow Chief Executive Officer Spencer Rascoff, 35, said in a phone interview from Nasdaq today. “The fact that we raised the range during the road show and then priced above the range is a pretty good indicator of just how anxious investors are for growth companies.”
All of the shares in the IPO were offered by Zillow. The company sold 274,999 shares of Class A common stock at $20 each to existing investors in the private placement, according to the statement. In its IPO prospectus, Zillow said it planned to sell the shares to Technology Crossover Ventures and PAR Investment Partners.
In other IPO news, Skullcandy Inc., a maker of fashion headphones, was unchanged at $20 as of 4 p.m. New York time on the Nasdaq, trading under the symbol SKUL. Earlier, the shares rose as much as 17 percent to $23.40.
Skullcandy raised $188.8 million yesterday in an expanded IPO after increasing the number of shares and pricing them above the marketed range.
The Park City, Utah-based company sold 9.44 million shares at $20 each, according to a statement, after offering 8.33 million for $17 to $19 apiece. Bank of America Corp. and Morgan Stanley managed the IPO.
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