Price it high and an IPO may shoot for the sky in the aftermarket.

That’s the reason why Gander Mountain and SiRF Technology – two of the four IPOs priced last week – scored sharp opening-day gains. Both were priced on the high end of their filing ranges.

Riding high

Gander Mountain, a Minneapolis-based sporting goods retailer, priced its IPO at $16 per share on Tuesday evening, April 20. That was on the high end of its $14- to $16-per-share filing range. On April 21, the stock closed its opening day at $22.02 per share, up 37.6 percent from its initial offering price. It closed April 23 at $24.10 per share, up 50.6 percent from its offering price.

SiRF Technology, a San Jose, California-based supplier of Global Positioning System semiconductor solutions, priced its IPO at $12 per share on Wednesday evening, April 21. That was on the high end of its $10- to $12-per-share filing range. On April 22, the stock closed its opening day at $15.30 per share, up 27.5 percent from its initial offering price. It closed April 23 at $16.10 per share, up 37.6 percent from its offering price.

The other two IPOs priced last week – Assured Guaranty and ProCentury – were sold at the low end of their filing ranges. They struggled in the aftermarket.

On the down low

Assured Guaranty, a Bermuda-based provider of credit enhancement products for municipal financing, structured financing, and mortgage markets, priced its IPO at $18 per share on Thursday evening, April 22. That was on the low end of its $18- to $20-a-share filing range. On April 23, the stock closed its opening day at $18 per share, unchanged from its initial offering price.

ProCentury, a Westerville, Ohio-based specialty property and casualty insurance holding company, priced its IPO at $10.50 per share on Tuesday evening, April 20. That was near the low end of its $10- to $12-per-share filing range. On April 21, the stock closed its opening day at $10.50 per share, unchanged from its initial offering price. It closed April 23 at $10.75 per share, up 25 cents per share or 2.4 percent from its offering price.

So here’s something an investor can tuck away for future reference.

Comparing an IPO’s final offering terms to its original filing terms has always been a good guideline as to how the new issue will perform in the aftermarket.

Since January 1, 2002, investment bankers have priced 211 IPOs, according to available records:

• Investment bankers priced 64 IPOs below their original filing ranges. The average opening-day gain was 1.2 percent.

• Investment bankers priced 78 IPOs within their original filing ranges. The average opening-day gain was 9.22 percent.

• Investment bankers priced 69 IPOs above their original filing ranges. The average opening-day gain was 20.1 percent.

Conclusion: To see how an IPO will perform in the aftermarket, all you have to do is look at the final offering terms.

Back to the future: The dot-com IPOs

Since the Internet bubble burst in 2000, six Internet-related companies have gone public. The first to make its debut was iPass in July 2003. But it didn’t add “dot-com” to the end of its name.

IPass is a Redwood Shores, California-based provider of software services that let companies connect, simply and securely, with their employees from networks in about 150 countries. IPass priced its IPO at $14 per share on July 23, 2003. The IPO closed its opening day at $18.67 per share, up 33.3 percent from its initial offering price. By the way, the deal was priced above its original filing range of $9 to $11 per share. The stock sold high at $29.19 per share on September 18, 2003. But it has slipped below its offering price since then. The stock closed April 23, at $12.24 per share, down 12.6 percent from its initial offering price.

Back to the present

As of the close on April 23, the IPO pipeline had seven Internet-related new issues waiting to get priced. But before a company can go public, it must set proposed offering terms, such as the number of shares and the price range. That enables buyers to analyze the company.

During the week ending April 23, three Internet-related companies set proposed offering terms for their IPOs. Yes, more dot-com IPOs are coming to the new-issues calendar:

·          Blue Nile, a Seattle-based online retailer of high quality diamonds and fine jewelry, set proposed offering terms to price 3.74 million shares at $17.50 to $19.50 each to raise $69.2 million. The company is offering 2 million shares and selling shareholders are offering 1.74 million shares. Merrill Lynch and Bear Stearns are the co-lead managers. Acting as co-manager is Thomas Weisel Partners. At press time, no offering date had been set. But stay tuned.

·          Salesforce.com, a San Francisco-based provider of application services for organizations to share customer information to businesses, set proposed offering terms to price 10 million shares at $7.50 to $8.50 per share to raise $80 million on April 20. Morgan Stanley is the lead manager. Acting as co-managers are Deutsche Bank Securities, UBS Investment Bank, Wachovia Securities, and William Blair. At press time, no offering date had been set.

·          Shanda Interactive Entertainment, a Shanghai-based operator of online games in China, set proposed offering terms to price 17.3 million American Depositary Shares at $13 to $15 each. Goldman Sachs (Asia) is the lead manager. Acting as co-managers are Bear Stearns, CLSA/CIBC World Markets, the Hong Kong and Shanghai Banking Corp., and Piper Jaffray.

Early in the week, a couple of the IPO reporting services listed the Shanda Interactive IPO on the new-issues calendar for as soon as the week of April 26. A spokesperson for the lead manager Goldman Sachs had a different offering date. She said the deal is expected on July 11.

Translation: Your call!