Nearly every week seems to mark the birth of at least one new tech IPO star, but a close look at recent debutante
(CTCT - Get Report)
shows that not all are burgeoning with the same promise.
Constant Contact has spent years building up a strong business and market footing in an overlooked sector. Its reliance on a Web-based, on-demand product seems to resonate among not-so-tech-savvy clients who want an easy way to keep in touch with their own customers.
, whose stock has been volatile over the past couple of years, Constant Contact offers a hand-holding relationship to small companies, from wine stores to individual "power sellers" on
(EBAY - Get Report)
, allowing them to use a browser to send email updates and newsletters to contact loyal customers.
And that, combined with the popular on-demand model, seemed to be enough to drive the company's stock to $30 the day after its debut last week, nearly double its offering price of $16. It's only the latest in a host of tech companies to have gone public since August and see their stock rise more than 50% on the first day.
The stock was trading recently at $26.19, off 2.8%.
But there are some factors that make the high post-IPO valuation seem puzzling: Despite its lengthy history, the company is still posting losses, and rather than benefiting from the economies of scale that other on-demand companies are seeing, some costs are rising.