NEW YORK Financial Engines Inc (FNGN.O), which sells financial analysis based on the work of Nobel laureate and co-founder William Sharpe, rose as much as 42 percent on Tuesday -- the best initial public offering performance in months.
Financial Engines provides portfolio, investment and retirement advice. It makes money by charging fees based on the amount of assets it manages and on subscriptions.
The company had contracts with more than 760 retirement plan sponsors with 7.4 million participants topping $500 billion in retirement savings as of December 31. It also had independent agreements with about 391,000 individuals representing about $25.7 billion in assets.
The company said in its prospectus it estimates that it is tapped into a network of retirement plan providers with more than $1.5 trillion in assets.
Financial Engines' growth prospects, recurring revenue and increasing gross margins are attractive to investors, saidIPOdesktop.com President Francis Gaskins.
Sharpe's name helps too, he said.
"Sharpe is icing on the cake for investors," he said. "It's a way to differentiate (Financial Engines) for its target market. It gives potential customers a feeling that they are going to be OK."
Financial Engines co-founder Sharpe jointly won the Nobel Prize in Economic Sciences in 1990 for his work on financial theory, including how assets are priced and the Sharpe ratio, which measures the relationship between risk and reward.
Sharpe serves as a director emeritus for Financial Engines and is a professor emeritus at the Stanford Graduate School of Business.
Shares in Palo Alto, California-based Financial Engines opened 26 percent above the IPO price at $15.14 and rose as high as $17.07 in early afternoon trading on the Nasdaq.
Financial Engines on Monday was the first initial public offering in the United States to price above its expected range this year. The Palo Alto, California-based company sold shares for $12 each, ahead of the $9 to $11 it had filed for.
Even so, the company cut the number of shares it sold. It had filed to sell 10.9 million shares, but lowered that to 10.6 million shares in a later filing. The company on Monday sold 10.6 million shares.
Many companies this year have cut their IPOs as investors hesitate to assign high values to unproven companies with uncertain growth prospects or stiff competition. Some deals have been postponed or canceled.
Financial Engines' shareholders include funds associated with venture capital investors Foundation Capital Leadership Fund and New Enterprise Associates, and private equity investor Oak Hill Capital Partners.
The company posted a 19 percent increase in revenue to $85 million in 2009. The company swung to a profit in the same period, posting net income of $5.7 million compared with a $3.6 million loss a year earlier, according to a filing with the U.S. Securities and Exchange Commission.
Goldman Sachs & Co and UBS Investment Bank are the lead underwriters. The company is trading on the Nasdaq under the symbol "FNGN."
(Reporting by Clare Baldwin. Editing by Robert MacMillan)