The stock of health information Web site WebMD Health Corp. rose as much as 71 percent in its first day of trading, Thursday.
Shares of the New York-based company, which operates the Webmd.com site, closed Thursday at $24.40, above its IPO price of $17.50, after hitting a high of $30 earlier in the day.
The company priced 6.9 million shares at the high end of the $15.50 to $17.50 range set by underwriters Morgan Stanley and Citigroup Inc. That range was raised earlier this week to $15.50 from $13.50, as investors showed increased interest in the deal.
WebMD, a subsidiary of WebMD Corp. — which is changing its name to Emdeon Corp. — drew strong investor interest despite its poor financials. The company has been profitable in just one year — 2004 — since 2001, and its losses have been mounting recently, with expenses outpacing rising revenue.
In the first six months of 2005, the company reported a loss of $2.51 million, compared with a loss of $2.22 million in the same period a year ago. In its prospectus, the company could give no assurances of when — or if — it will be profitable again.
Investors said the deal was parceled out by underwriters in small allocations of several hundred shares, so anyone wanting to build a larger position in the stock Thursday had to consolidate it through multiple small trades.
"When an offering is priced at $17.50 and runs up 50 percent in a matter of minutes, it's trading forces, not fundamentals, driving it," said Ben Holmes, of Protege Funds LLC, an investment firm in Boulder, Colo., that received shares in the offering.
Holmes said it's difficult in such a situation to know how long a stock will hold on to its gains, and what will happen to it once analysts begin issuing research on the company.
In the case of Baidu.com Inc., a Chinese Internet search engine that rose 354 percent to $122.54 on its first day of trading on the Nasdaq in August, the stock dropped 28 percent earlier this month when analysts initiated research coverage with bearish ratings. Baidu closed Thursday at $65, still 141 percent above its IPO price of $27.