The strong performance of two technology IPOs Friday, which came despite a big tumble in the stock market, is rekindling hope that the capital markets can fund the growth of companies.
Shares of business analytics software company Qlik Technologies Inc., based in Radnor, Pa., rose 29 percent to $12.88. Shares of RealD Inc., a Beverly Hills, Calif., company which makes glasses and projectors for viewing movies in 3-D, jumped 25 percent to $20.04
The two companies spiked despite a 2.4 percent tumble in the Standard & Poor's 500, while the Dow Jones industrial average lost 223 points. Shares tumbled after a big slide in a measure of consumer confidence and disappointing bank earnings.
"The bottom in the IPO market had been reached," said David Menlow, owner of research firm IPOfinancial, because companies and underwriting banks are offering investors shares for less than they would have asked earlier this year.
Qlik and RealD both priced above expectations, suggesting there was strong demand for their shares. That's been rare this year, with 46 percent of companies pricing low, according to IPO research firm Renaissance Capital.
During the second quarter, companies struggled to raise as much money as they had hoped for, and 17 had to cancel their offerings. Only 39 went public, about half as many as in the second quarter of 2007, before the financial crisis took hold.
While big-name companies such as options exchange CBOE Holdings Inc. and electric car maker Tesla Motors Inc. amassed double-digit gains on their first day of trading, most companies have struggled this year to trade higher without first giving investors low initial prices on shares.
The success of Qlik and RealD will have a "spillover effect on the other IPOs that are looking to come forward," Menlow said. "It gives a bit more confidence in overall market psychology."
Qlik chose to start promoting the company to potential investors in late June despite knowing that "the market might not be ideal" to go public right now, said CEO Lars Bjork. "A great story can go out at any time. We don't compete with a lot of other great stories."
Qlik, whose software analyzes costs and organizes and finds information, said its revenue grew by one-third last year, and by nearly two-thirds in the first six months of 2010.
It has grown to 14,000 customers as of March of this year from 2,000 in 2005. Its clients range from small businesses to major corporations such as Campbell Soup Co. and Qualcomm Inc.
RealD, meanwhile, is capitalizing on movie fans' increasing appetite for 3-D films. Founded in 2003, it says it is now the leading provider of 3-D projectors to movie theaters worldwide, and the three biggest movie chains in the U.S. — AMC Entertainment Inc., Cinemark Holdings Inc. and Regal Entertainment Group — license its technology. Of the 16,000 screens using digital projectors, nearly 6,000 screens use RealD's technology, the company says.
The company also makes the glasses for viewing 3-D movies and technology for consumer electronics makers that display 3-D content.
Qlik raised $112 million, while RealD raised $200 million. Just over half of the shares sold in RealD's offering came from stockholders, so the company did not receive that portion of the proceeds.
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