We all knew that AeroVironment (AVAV-NASDAQ) was going to be a good IPO. Its first print was $25.00 out of the chute at 11:45 AM EST, and that may be "too good."
They make backpack-sized aerial surveillance drones for the military, and have some corporate revenue as well. The IPO priced 6.7 million shares at $17.00 last night, above the range. Last Friday night on CNBC’s MAD MONEY, Jim Cramer touted the stock. In his IPO play book he said you can buy it up to $20.00 and sell above $25.00. That gave it an almost instant cult following similar to that of an iRobot (IRBT). But this opening premium is likely increased by the Cramer following because now he got 200,000 retail investors interested in it that would have otherwise been more concerned with Yahoo! and Microsoft earnings.
Oh well, that’s life. This is what happens when IPO’s get hyped in the media before the deals price. Can it go higher? Sure, it could go to $30 or even higher; IPO’s often trade on sentiment and hype rather than fundamentals. After a while reality sets in, and then fundamentals matter. Anyone evaluating the deal as "cheap" based on the multiples used before last night has to multiply all of the multiples by about 1.5 and they’ll see that all of a sudden it isn’t so cheap. It was going to have an implied $350 million market cap, but now that is $500 million based on near-$25.00 stock trades.
Jon C. Ogg
January 23, 2007
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