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Car Auctioneer on Top in Mixed IPO Trading

Adesa outperforms two technology firms, with its shares closing 5.2% above the offering price.

June 17, 2004|From Dow Jones/Associated Press

The trading debut of a used-car auctioneer bested those of two technology companies Wednesday as investors continued to give a mixed reaction to new issues.

Adesa Inc., the auction company, had the best first day of trading, with its New York Stock Exchange-listed shares closing at $25.25, 5.2% above its $24 offering price.

Pricing of the initial public offering of 6.25 million shares was at the middle of price estimates of $23 to $25 a share.

Semiconductor maker Leadis Technology Inc. and biotechnology company Metabasis Therapeutics Inc. both fell.

Leadis closed at $13.10, down 90 cents from its $14 offering price, and Metabasis fell 34 cents from its $7 offering price to $6.66. Both companies trade on Nasdaq.

Most analysts had expected Adesa to perform well.

The company, which also raised $125 million in a concurrent debt offering, runs wholesale vehicle auctions. It owns a network of 53 used-car auctions and 27 salvage auctions and provides short-term loans to car dealers.

"It's a little moneymaking machine," said Sal Morreale, who tracks IPOs for Cantor Fitzgerald in Los Angeles.

In the first quarter, Adesa booked revenue of $247.3 million, with net income of $33.3 million, according to Securities and Exchange Commission filings.

Adesa, based in Carmel, Ind., was a public company from 1992 to 1996, when Minnesota utility Allete Inc. acquired it. Allete plans to distribute its remaining 93% stake to its own shareholders in a tax-free distribution, probably within four months.

The big surprise for many analysts was the weak showing for Leadis, which makes chips used in cellphones, digital cameras and hand-held computers. Many analysts thought that the growth in products such as cellphone cameras would attract investors to the IPO.

Leadis priced its 6 million shares at the high end of estimates of $12 to $14 a share.

The company, based in Sunnyvale, Calif., turned profitable last year and has seen its growth accelerate recently.

Leadis booked revenue in the first quarter of $34.8 million, up from $8.2 million in the same period a year earlier, according to offering documents filed with the SEC. Net income grew to $4.7 million from $661,000 a year earlier.

For 2003, Leadis reported net income of $12.7 million on $84.4 million in revenue. That profit came just 3 1/2 years after its inception.

Most of its revenue, though, comes from just two customers. In 2003, sales to Royal Philips Electronics accounted for 76% of its revenue. Almost all the rest came from Samsung Electronics Co.

Metabasis' lackluster debut followed similar weak showings for other biotechnology stocks during the last several months. Like other drug developers, Metabasis, based in San Diego, was forced to cut price terms on its IPO to stimulate demand.

Initially, Metabasis sought to sell its 6 million shares at $11 to $13 a share, but the range was lowered to $8 to $9 this month.

After two weeks of delaying the deal, it cut the price range further, to $7 to $8, and priced at the low end of that range.

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