Avanex, FirePond Shares Surge, Continuing Strong IPO Trend

Two new issues celebrated Friday by more than quadrupling on their first day of trading.

Avanex(AVNX) soared 377%, making it the biggest one-day gainer so far this year among the highflying new issues. Close behind was FirePond(FIRE), which bounded 355%.

But as stunning as these gains are, they are dwarfed by some of 1999's big winners, including VA Linux (LNUX), whose 733% rise was the largest gain of any new issue on its first day of trading. Still, the enthusiastic reception that Wall Street gave Avanex and FirePond provides more evidence that the market for initial public offerings remains hot in the second month of the new year.

Shares of Avanex soared 136 points on Friday to close at 172.

Avanex, based in Fremont, Calif., makes tiny photonic processors used in networking equipment.

"The implications for the numbers being paid for the stock are staggering," said Kevin Slocum, an analyst at Wit SoundView, who said his firm unsuccessfully sought the investment banking business of Avanex.

"They did an extraordinary job of positioning their company," he said. "The company described themselves as the next-generation supplier to the optic network, likening themselves somewhat to Intel(INTC), which has carved out the high ground in the microprocessor market.

"They have two products that are expected to do really well," Slocum added. "But it would be a mistake to say that this company will change the landscape of the sector."

Slocum was referring to PowerMux, an Avanex product that lets network operators increase bandwidth for sending more data, and PowerShaper, which helps fix the signal interference that is created when transmitting light at faster speeds.

Slocum follows JDS Uniphase(JDSU), another company in the fiber-optic market. No firms have formally begun coverage of Avanex.

Avanex and its lead underwriter, Morgan Stanley Dean Witter, garnered $216 million on the sale of 6 million shares for $36 apiece. Premarket demand for the fiber-optic component-maker was so strong that its initial offering price was raised 220% from a midrange of $14. In December, the company had hoped to garner just $96.6 million from the offering.

But there were more big winners before the trading had even started, as Microsoft(MSFT) and MCI WorldCom(WCOM) each garnered about $61.1 million from the IPO by investing in $5 million worth of shares for $13 apiece, according to an Avanex filing with the Securities and Exchange Commission.

Some researchers are saying the market for Avanex's products could reach $21.3 billion by 2003, from $5.5 billion in 1999.

Meanwhile, enthusiasm for FirePond also exploded Friday, sending its stock up 78 1/4 to close at 100 1/4.

FirePond's investors scrambled to get a piece of the growing e-business market. The company, based in Waltham, Mass., develops software that enables businesses to conduct Internet-based sales and marketing with their customers and other businesses.

The sale of 5 million shares at $22 apiece brought in $110 million for FirePond and lead underwriter Robertson Stephens. The company had originally thought it would offer the stock for about $12, but nearly doubled the price as premarket demand among investment firms grew.

Not far from the epicenter of IPO emotion was Antigenics(AGEN), a biotechnology company that more than tripled, gaining 42 3/8, to close at 61 3/8. The $18-a-share initial offering price had been raised from an original range of $14 to $16.

Shepherded by lead underwriter U.S. Bancorp Piper Jaffray, Antigenics raised $63 million through the sale of 3.5 million shares. And Therma Wave(TWAV), a company that develops process-control measures for use in semiconductor manufacturing, surged a comparatively meager 84%, rising 17, to close at 37.

ThermaWave's IPO was priced at $20, above the initial range of $15 to $17. Together with the help of lead underwriter Banc of America Securities, ThermaWave raised $180 million from the sale of 9 million shares.

Next week may be a test of endurance for the speeding IPO market as Chordiant, which makes e-business infrastructure software, and other biotechnology companies like Diversa go public.

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