NEW YORK -- Ticketmaster Online-CitySearch Inc. joined the ranks of high-flying Internet stocks after going public Thursday as investors rushed to buy into the online ticket seller and entertainment guide.
The company's shares soared as high as $63.37 1/2, 350 percent above the offering price of $14. They gave back some of that ground to end at $40.25 in heavy trading on the Nasdaq Stock Market.The Pasadena, Calif.-based company sells concert, sporting event and other tickets over the Internet and provides city maps, entertainment guides and online shopping.
The company sold 7 million shares for $14 each Wednesday. It had expected the shares to price at between $11 and $13 each.
The runup in trading gave the small, recently merged company a stock market valuation of about $3.5 billion, which troubled some analysts.
"What we're dealing with here is a valuation problem. A $3 billion market capitalization certainly seems excessive," said Michael Murphy, editor of Overpriced Stock Service, a monthly newsletter in Half Moon Bay, Calif.
"I'm dubious in this environment that anything is going to wind up above the offer price, or any reasonable price, anytime in the near future."
Ticketmaster Online-CitySearch's public offering comes at a time when investors seem hungry for any new offerings of stock in Internet-related companies, as evidenced by the buying frenzy that followed the market debuts of Yahoo!, Amazon.com, EarthLink, theglobe.com, CDNow and eBay.
"The demand is not being fully met by any one offer, so you're seeing huge demand on really small offerings," said Steve Harmon, senior investment analyst for Internet.com, an Internet news resource.
But the euphoria often is short-lived and the buyer's high replaced by a dumping of the stock, creating a sharp downswing in prices.
For that reason, Murphy said that while the IPO raised a huge amount of cash for Ticketmaster Online-CitySearch and made winners of those who got in early and got out quickly, Murphy said, it will make losers of countless investors.
Murphy predicts a steady decline in the stock price until it hits a "fairly valued" $20.
"These are all essentially momentum investors. When the price starts to decline, they all sell," he said.
"This is just like the biotech stocks in 1991 or multimedia in 1993 or disk drives in 1983. It always ends the same way, which is badly. I just hope it doesn't drag tech stocks down with it."