Today: After Twitter's explosive initial public offering, this week's host of IPOs shows that investor enthusiasm is company-dependent, not widespread "hysteria." Also: Apple (AAPL), Twitter and EA fall, Pandora soars.
The Lead: Uneven performance after Twitter shows not all IPOs created equal
The cries of a tech-IPO bubble after Twitter soared in its market debut last week seem to have quieted down, as the companies that have gone public in the aftermath of the San Francisco company have performed unevenly, showing that investors may overvalue some companies but are not bidding up new stocks from tech firms willy-nilly.
Friday's highest profile debut was a big hit on Wall Street: Seattle e-tailer Zulily soared more than 90 percent higher than its IPO price in its first day of trading after raking in $253 million. The company, which targets parents of young children with online deals, sold 11.5 million shares for $22 apiece, above its projected range of $18 to $20, and moved as high as $41.32 before closing at $37.70, 71.4 percent higher than its IPO price.
"This shows that an e-commerce company with a strong, specific focus can be a success," CEO Darrell Cavens told The Wall Street Journal. "It's a good sign for others."
Experts expected Twitter to be a good sign for others, as well, but that didn't turn out so well for textbook-rental company Chegg. Obviously expecting a resurgent interest in consumer-focused tech companies, the Santa Clara company priced its IPO $1 higher than its proposed range earlier this week, only to suffer the largest first-day decline for a debut stock this year.
Santa Clara University professor Steve Diamond contends there wasn't a bubble for Twitter that popped at Chegg, which Zulily's results back up. Instead, he said earlier this week, "The Twitter IPO does show there's an appetite out there. There's going to be hits, and they're going to be misses."
Silicon Valley provided two other examples of the up-and-down nature of the IPO market this week. While biotechnology companies have reached Wall Street at a fast pace so far in 2013, expected IPOs from Bay Area biotechs Relypsa and CardioDX did not exhibit strong demand for those companies.
Redwood City-based Relypsa slashed its proposed price range by a third in the run-up to its IPO, from $16-to-$19 to an expectation of just $12, and even that was too high to generate enough demand. Instead, the company priced its shares at $11, raising about $75 million; after reaching Wall Street on Friday, the company's shares showed little indication Relypsa had left money on the table, trading in a range from $11.55 to $12.60 before closing at $12.04, 9.5 percent higher than its IPO price.
At least Relypsa made it to the trading floor: Palo Alto-based CardioDX postponed its planned IPO instead of slashing its price, citing "poor market conditions." San Diego biotech company Celladon made the same decision earlier this week, and cited the same issue.
While it may seem hard to reconcile Chegg's decline and other companies claiming there is a poor market for IPOs while Twitter and Zulily walk away with hundreds of millions of dollars and booming stock prices, the answer is simple. Companies with a strong story and/or fundamentals to sell will find willing buyers: Twitter has strong name recognition and fast-growing mobile advertising revenues, while Zulily went to market with the ability to show a profitable business with strong revenue growth.
"We've been cash-flow positive for the past few years," Zulily founder Cavens told USA Today. "That's one of the pieces of the story that's different than what's out there."
SV150 market report: Indexes gain again, Apple and Twitter decline
Wall Street's main indexes reached record highs Friday for the third consecutive day and capped off a sixth straight week of gains, and Silicon Valley stocks also gained despite weakness from a few big names.
Apple declined 0.6 percent to $524.99 as Gartner research seemed to confirm this week's report of Android's dominance in the smartphone market. While some Apple bulls countered those reports by pointing out that Android's market share is built on cheaper phones that generate little profits or revenues, the same argument can no longer be used in the tablet market: Morgan Stanley analyst Katy Huberty reported Friday that Android has passed Apple in tablet revenue for the first time.
Electronic Arts (ERTS) took a big tumble Friday, falling 7.3 percent to $24.06 despite the arrival of the PlayStation 4 and upcoming Xbox One debut, which Piper Jaffray believes will be a positive for the Redwood City video game maker. Twitter declined 1.6 percent to $43.98 as options traders targeted the fresh Silicon Valley stock and S&P Capital labeled the company a "Sell." Tesla Motors (TSLA) continued to struggle on Wall Street as it looks to solve a battery-supply problem, losing 1.6 percent to $135.45 despite car-sales numbers that show growing market share in California.
The SV150 index of Silicon Valley's largest tech companies: Up 5.58, or 0.39 percent, to 1,417.69
The tech-heavy Nasdaq composite index: Up 13.23, or 0.33 percent, to 3,985.97
The blue chip Dow Jones industrial average: Up 85.48, or 0.54 percent, to 15,961.7
And the widely watched Standard & Poor's 500 index: Up 7.56, or 0.42 percent, to 1,798.18
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.