Shares of Perot Systems had a stunning debut, more than doubling on the first day of trading on Tuesday, as investors wagered that founder Ross Perot can create another computer-services powerhouse.
The Dallas company's shares were priced at US$16 and climbed to as high as $47 shortly after the first trade. It closed at $42.50 and raised about $104 million from the initial public offering. The New York Stock Exchange even had to halt trading in the stock for a while in the morning, as demand for shares far outstripped supply.
The stock's ascent surprised some analysts. Although they saw Perot Systems as a solid company, they hadn't expected it to draw the kind of skyrocketing valuation typically reserved for Internet stocks.
"I've never seen this type of frenzy before in this sector," said Gregory Gieber, an analyst with Brown Brothers Harriman. "It's a solid company. They're profitable, and they're in a very good business. It's just that they're selling at a variable that's nowhere near that of similar firms in the industry."
Perot Systems (PER) specializes in setting up computer networks for big- and medium-sized companies, mostly in the finance, energy, health-care, and travel industries. The company is named for its founder, the mercurial but ultimately unsuccessful presidential candidate in both 1992 and 1996. Perot also founded Electronic Data Systems, or EDS, a company that eventually became the biggest computer-services company and the source of Perot's billions. Perot Systems, ironically, will have to compete with sibling EDS.
So far, Perot Systems' earnings have been solid. In the first nine months of 1998, the company had a profit of $149 million, about $30 million more than it made in the same period a year ago.
Steven Tuens, director of research at IPO Value Monitor, sees two factors behind the company's big debut: the market's appetite for technology IPOs and Perot's clout among investors. Still, while Tuen anticipated a strong first-day showing, he admitted he didn't expect to see the stock doubling on its first day of trading.
The company's main competitors include Andersen Consulting, Computer Sciences Corp., and EDS. For the most part, computer-services companies have seen their stocks climb solidly in recent months, but not anything like the meteoric rises of Internet stocks.
Perot Systems, in a filing with the Securities and Exchange Commission, said it planned to use the proceeds for employee stock options, business expansion, and other "general corporate purposes."
The offering also raised a nice sum for the Perot family. Perot and his son Ross Perot Jr. control 38.4 percent of company shares, a stake worth about $1.4 billion.
