Shares of West Corp. fell in their first day of trading Friday, closing 5.5 percent below the initial public offering price as U.S. stocks climbed marginally.
The shares of leading U.S. teleconferencing company West fell $1.10 cents to close at $18.90 in their first day of Nasdaq trading, according to preliminary closing data. Thursday, the Omaha-based employer of 3,000 people in the metro area said it had agreed to sell 21.3 million shares at $20 each.
The Standard & Poor’s 500 rose less than one percent Friday on the way to the second weekly loss of the year.
The $20 IPO price is the price investment banks agreed to pay Thursday before reselling them to other investors Friday. West raised $426 million from that sale. The company said it plans to use the proceeds to reduce debt.
The company earlier this month expected to price the offering at between $22 and $25 per share but lowered it this week.
When the shares started changing hands Friday, they fell below the reduced IPO price. About 25 percent of IPOs in their first day close at or below the day-before-price, according to Jay Ritter, a professor at the University of Florida.
“It is not at all unusual,” said Ritter, whose IPO research has appeared in the Journal of Finance and the Journal of Financial Economics. “First-day returns have almost no predictability for future returns.”
At the $18.90 Friday closing price, West’s market capitalization, or shares outstanding multiplied by stock price, was about $1.5 billion. That puts the company’s market cap slightly higher than that of Omaha irrigation systems maker Lindsay Corp., which is worth $1.2 billion. The largest publicly traded Omaha company by market cap is diversified conglomerate Berkshire Hathaway, at about $253 billion. The smallest is grocery and tobacco wholesaler Amcon Distributing, at about $47 million.
The IPO creates a liquid market for the shares of the company’s Omaha founders, Gary and Mary West, and later investors who took the company private in a 2006 buyout that valued West at $4 billion.
The majority owner is Boston-based investment partnership Thomas H. Lee, which led the 2006 buyout, with 44 percent of shares outstanding. That stake of about 36.5 million shares was worth about $690 million at the close of trading Friday.
Thomas H. Lee’s 2006 investment in West generated spectacular returns, Bloomberg News reported Friday. The $20 offering price, Bloomberg said, values West’s stock at about 21 percent more than the 2006 $725.8 million investment by Lee and a minority partner. Including a $350.6 million dividend the firms paid themselves in August, Lee and minority investment partner Quadrangle Group would reap an overall gain of 69 percent if they sold the shares at $20, Bloomberg said.
The Wests, now living in California and devoting most of their time to charitable work, each own about 9 percent of the company. That stake of about 15 million shares was worth $284 million Friday.
The Wests have contributed at least $400 million to charities in recent years through their foundation. The couple collected about $1.45 billion for their stake in West in the 2006 deal that took the company private after 10 years as a publicly traded company.
Lee, Quadrangle and the Wests have agreed to not sell their shares for at least six months.
West employs 37,500 people worldwide who handle conference calls, furnish software that runs 911 emergency switchboards and which handle telemarketing and customer service inquiries for other companies. The company had sales last year of $2.6 billion, generating a profit of $126 million.
The U.S. market for initial public offerings is off to a strong start in 2013, with 25 IPOs having raised about $6.7 billion through last week, on year-to-date gains in stock market indexes, according to a report by consultant Ernst & Young.
“There have already been far more IPOs than we anticipated,” E&Y wrote. “We are finally seeing a level of confidence return to the markets after a tumultuous few months following the U.S. election and the fiscal cliff.”
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