Amazon.com IPO Sizzles On Its Opening Day

NEW YORK (Dow Jones)--Amazon.com Inc.'s (AMZN) initial public offering opened nearly 12 points higher than its offering price Thursday as traders chased after one of the hotter IPO's to come to market this year.

The Internet bookstore's stock was priced Wednesday night at $18 and opened at 29 1/4. The price has since settled to 24 3/4.

''People are very excited about Amazon's prospects, and most people believe Amazon will be a long-term player on the Internet,'' said Ryan Jacobs, IPO Value Monitor's research director.

He said Amazon could be a multibillion-dollar company in three to five years if it grows at even a fraction of the rate it has been.

Amazon.com's founder and chief executive, Jeff Bezos, told Dow Jones late last year that monthly revenue was increasing by 20% to 30% a month.

Interest in the deal was so intense that underwriters led by Deutsche Morgan Grenfell Inc. increased the size of the offer Wednesday to 3 million shares from 2.5 million shares. Price talk moved up to $14 to $16 a share from $12 to $14, and the stock was of course sold at a premium.

''The allocations were scarce,'' said Sam Dedio, an analyst with Evergreen Asset Management. ''Look at the stock price. It tells you this was way oversubscribed.''

The Amazon.com IPO is certainly hot, but Evergreen Asset Management's Dedio said he doesn't know what will support the company's stock price.

''When and if we start to see earnings, that to me is concrete. Right now, we have lots of excited people investing in a concept that they can relate to,'' he said.

Amazon.com is a popular Internet bookstore. The company has said that it sold $16 million worth of books in 1996 to 180,000 customers in 100 countries. Average daily visits to the company's Web site rose to 50,000 in December 1996 from 2,200 in December 1995.

But marketing and sales expenses increased to $6.1 million in 1996 from $200,000 the year before. Product-development expenses, which includes maintaining the computer network, were $2.3 million in 1996, up from $171,000 in 1995.

Overall, the company said it had an accumulated deficit of $6 million at the end of 1996.

''It's the novelty here. That was the attraction,'' Dedio said of the IPO. ''In this market, especially in technology IPOs, you have a momentum, and I don't want to call it a herd, but there's comfort in knowing that other people have heard of an idea or a company.''

Amazon.com joins a growing roster of strong IPOs, which provides further proof that the IPO market is springing back to life.

Rambus Inc. (RMBS), a Mountain View, Calif., semiconductor firm was priced at $12 a share and opened Wednesday at 23 3/4. The stock is now trading at 32 3/4.

The gains of these stocks underscores a change of performance among IPOs and the rebound of the Nasdaq Composite Index to its current 1,345, from an April low of 1,201.

John E. Fitzgibbon Jr., editor of the IPO Aftermarket, said the average gain for IPOs into the first week of May was 9.5%, compared with a negative 3.3% into the first week of April.

''This is the springboard of today's IPO,'' Fitzgibbon said. ''It set the stage for Rambus and Amazon.''