Zillow shares surge on their opening day
For the moment at least, Zillow Inc. is a McMansion.
Shares of the online real-estate firm bounded out of the gate Wednesday -- more than tripling in their opening minutes as a public company before easing back to settle in around $35 by midday, still up 75% or so with less than two hours left in the trading day.
The Seattle-based company listed on the Nasdaq Stock Market under the ticker symbol "Z."
The rousing debut, if it holds, is another example of the Internet-stock fever sweeping the market. Zillow's surge follows similar first-day leaps by its Internet brethren LinkedIn Corp. and HomeAway Inc.
[Updated: Zillow shares closed up $15.77, or 79%, to $35.77.]
The jump owes partly to the limited number of shares Zillow sold -- only 3.5 million -- despite the copious salivating from investors lately over Internet IPOs. That helped push up the stock from the $20 at which it was priced Tuesday night.
By comparison, Skullcandy Inc., a music headphone company that also made its debut Wednesday morning, has traded up just a few cents from its $20 IPO price.
Zillow's price surge is a potential cautionary note given that the company hasn't turned a profit in its seven-year history, although it is expected to later this year. Also, by one estimate Zillow controls less than 6% of the Internet real-estate market.
Pundits will continue to debate whether the latest fury for Internet stocks is a replay of the frenzy in the late 1990s that preceded the bursting of the dot-com bubble.
But one feature of Zillow's IPO had eerie overtones.
At least one buyer had the misfortune of buying in at $60 -- saddling the unlucky soul with an immediate loss.
That dynamic -- a relative handful of buyers getting stuck with outrageously high prices -- was fairly common a decade ago. It often occurred because unsophisticated individual investors put in "market" orders -- instructions to buy regardless of the price.
No one's hoping Zillow fulfills its lofty investor expectations more than that buyer.
-- Walter Hamilton