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VCs Watch Riverbed Tech Shares Jump 57% On IPO Day
September 22, 2006 -- A technology stock ruled the IPO market Thursday, with shares of Riverbed Technology Inc. rising 57% on its first day of trading, making it the second-best debut for a new company this year.
The performance of Riverbed, which raised less than $100 million in its public stock sale, was the best since Chipotle Mexican Grill Inc. doubled in price on its first day of trading in January, according to deal tracker Thomson Financial. Riverbed outshone a far larger $1.06 billion offering on Thursday from pharmaceutical company Warner Chilcott Ltd. It also outpaced a smaller deal from medical-device maker Home Diagnostics Inc. All three stocks made their debuts on the Nasdaq.
The jump in stock price has given Riverbed's institutional investors -Accel Partners, Goldman Sachs Group Inc., Lightspeed Venture Partners and UV Partners - valuable holdings. According to Riverbed's regulatory filings, Accel Partners has a 20.8% stake afterthe offering, owning 13.4 million shares now worth roughly $204.5 million. Lightspeed owns 20.3%, or 13.1 million shares valued at about $200.4 million. UV Partners' 9.9% stake, or 6.4 million shares, is worth about $86 million, while Goldman Sachs' 4.6% stake and roughly 3 million shares is now worth $45.6 million.
Before the offering, Riverbed's investors had put in about $57.9 million into the company at an average price of $1.03 a share.
On Thursday, the stock price shot up to $15.30 from its IPO price of $9.75 a share. A total of 8.8 million shares were sold at a price above the expected range of $7 to $8.50 a share.
Riverbed, based in San Francisco, makes network-infrastructure products for computer systems. It's a fast-growing market, and Riverbed's revenue has increased rapidly since it was formed in 2002. For the first six months of this year, its revenue grew six-fold to $31.8 million, compared with the same period in 2005, as the company gained new customers and sold more equipment to existing customers.
But Riverbed is still a young company that is in the process of building up its sales and marketing force, and so its expenses are currently outpacing revenue growth. Its net loss in the first half of 2006 widened to $10.3 million, compared with $8.3 million in the first half of 2005. The company said it plans to continue investing heavily in sales and marketing by hiring more employees, and warned that it doesn't know when or if it will ever be profitable.
Goldman Sachs Group Inc. was the lead manager in Riverbed's IPO offering, which was originally filed in April.
www.riverbed.com
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