Riverstone IPO Toughs It Out
NEW YORK -- Talk about a spot of bad luck.
Riverstone Networks (Nasdaq: RSTN) made its first public trade on the Nasdaq exchange today (see All Eyes on Riverstone IPO ).
Unfortunately, the day it picked to debut was the one after Nortel Networks Corp. (NYSE/Toronto: NT) held an earnings announcement reminiscent of Greek tragedy (see Nortel's Nasty Surprise), causing Nortel's stock to crater and dragging the rest of the tech market down with it.
Considering the market conditions, Riverstone's IPO performed quite admirably. After being priced at $12, the stock started trading shortly after noon and quickly traded up $2 (17%) to $14. But the stock took a dip in the afternoon. At the close it was only up $1.06 (8.85%) to finish at $13.06 a share.
Bankers had priced the 10 million shares offered by Riverstone at $12 per share, raising $120 million for the company. The underwriters have an option to purchase up to 1.5 million additional shares to cover any over-allotments. The lead underwriter is Morgan Stanley Dean Witter. Earlier in the morning, the nasty opening on the Nasdaq caused some consternation at Riverstone's official coming-out ceremony. As Romulus Pereira, president & CEO of Riverstone, pushed the button to commence trading at the Nasdaq headquarters in New York City, the stock screen behind him lit up in a blaze of red.
Audience reaction was muted, though a couple of quiet cries of "Oh crap!" and "God, look at Cisco!" were discernible. Riverstone execs had on their game face. “How were we to know that Nortel was going to barf last night?” said Andrew Feldman, VP of marketing for Riverstone. “But we’ll do fine. We’re in this for the long term, and the next 18 months are looking good for us.”
The company, which makes IP switches and routers for the metropolitan area network, is the first communications startup to take the plunge into the chilly IPO market this year (see Riverstone Readies Its IPO ).
Riverstone executives are confident that their strategy will put them ahead of the rest of the pack.
“All-optical players won’t survive in this market,” says Pereira. “It’s not that interesting, but IP and optical together -- that’s a very interesting prospect.”
In morning trading, Nortel’s stock was trading at about $20 a share -- down 30 percent for the day -- dragging down the entire tech sector. Competitors Extreme Networks Inc. (Nasdaq: EXTR) and Foundry Networks Inc. (Nasdaq: FDRY) were down 15 percent and 10 percent respectively. And Cisco Systems Inc. (Nasdaq: CSCO) is trading down about 7 percent. None of this news bodes well for Riverstone. On the whole, Nasdaq is down about 4.5 percent.
Piyush Patel, the president and CEO of Cabletron Systems Inc. (NYSE: CS), Riverstone’s parent company, had a few words of caution for Nortel: “If they don’t watch out, within a year they could be another Lucent [NYSE: LU].”
-- Marguerite Reardon, senior editor, and Stephen Saunders, US editor, Light Reading http://www.lightreading.com