July 20, 2011 4:01 am

US IPOs price above expectations

Investors flocked to initial public offerings in the US consumer and tech sectors, despite worries about consumer confidence and questions about the valuations of web groups.

Zillow, which runs a web database with 100m US home prices, will be valued at $540m when it begins trading on Wednesday on Nasdaq. Its shares priced on Tuesday after the market closed at $20, above their projected rate of $16 to $18 a share.

The company’s successful pricing follows other web groups this year, notably LinkedIn and Pandora, in selling shares above their projected range. More recently, HomeAway, a vacation rental web site, saw its shares jump 39 per cent on their first day of trading after its pricing was bumped up at the end of June.

Investors did not initially value the opportunity to reach home buyers and renters as highly as other social networking services.

At $20 a share, Zillow is valued at roughly 18 times last year’s sales, while LinkedIn and Pandora priced at more than 30 times last year’s sales, comparable to the level where Facebook trades in private markets.

However, those lofty valuations have drawn concern that investors are expecting too much from dotcom groups in an echo of the 1990s-era tech bubble.

Also on Tuesday, the IPO of Skullcandy, a maker of designer headphones, priced at $20 a share, similarly above its expected range. The offering was also expanded to 9.4m shares. The shares will begin trading on Wednesday on Nasdaq.

The company, which had generated a profit of $1m in the first quarter after losing $9m in 2010, had originally intended to sell 1m fewer shares at a maximum price of $19.

The share price values the company at $540m, or 3.3 times last year’s sales. The offering will raise $18m, which the company said will be used primarily to repay its debts.

The next week will see a batch of consumer groups debut. Dunkin’ Brands, parent of coffee and doughnuts chain Dunkin’ Donuts, is aiming to raise up to $460m next week in a private-equity backed offering.

The parent of Francesca’s Collections, a women’s clothier, is set to price later this week, aiming to raise $150m. Both will trade on Nasdaq, where 14 of 24 consumer groups currently in the pipeline are set to debut.

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE