Palo Alto Networks Inc. and Kayak Software Corp. jumped in their trading debuts after raising more than planned in initial public offerings, bolstering the revival in technology IPOs.
Palo Alto climbed 27 percent to $53.13 in New York, while Kayak rose 28 percent to $33.18. Palo Alto sold 6.2 million shares at $42 each Thursday, generating more than $260 million, while Kayak sold 3.5 million shares at $26 each to raise $91 million. Both priced their sales above the proposed ranges.
The sales indicate that the recovery in U.S. technology IPOs is building on momentum from the June offering of software maker ServiceNow Inc., which handed a 37 percent gain to new investors on its first day. While pricing above the range shows investors’ appetite for risk has grown, the stocks may have trouble maintaining the valuations, which were higher than peers’, said Thornburg Investment Management Inc.’s Tim Cunningham.
“People are open to taking on the risks of IPOs — what’s going to be more important is how these stocks trade,” said Cunningham, who helps oversee $79 billion at the firm in Santa Fe, N.M. “It seems like overall the quality of the deals and companies is pretty good, and I think that helps.”
Other IPOs met with less enthusiasm. Fender Musical Instruments Corp., the largest guitar seller in the U.S., canceled its offering Thursday night, saying economic conditions prevented it from obtaining an “appropriate valuation.” The Scottsdale, Ariz.-based maker of the Stratocaster had planned to raise as much as $160.7 million in its offering.
Morgan Stanley led the offering for Kayak, as well as those for Palo Alto, ServiceNow and Facebook. The New York-based bank came under fire after Facebook’s debut as the stock languished, with some shareholders filing lawsuits claiming the company and its underwriters overpriced the IPO.
“This recent IPO success can set a better tone for Morgan Stanley,” said Richard Sichel, chief investment officer at Philadelphia Trust Co.
