Shares of in-flight WiFi provider Gogo Inc (GOGO.O) fell as much as 9 percent in their market debut as investors questioned the company's high valuation in the wake of a two-day slide in U.S. stocks.
The weak market reception for Gogo raised questions about the pricing of other U.S. initial public offerings (IPOs), with as many as 10 companies looking to go public next week.
The company's underwriters, led by Morgan Stanley, JP Morgan and UBS, priced the IPO of 11 million shares at the top of its planned $15 to $17 range, valuing the company at about $1.5 billion.
"I think the deal was mispriced for market conditions," IPOfinancial.com President David Menlow said.
Others questioned Gogo's profitability. Its service is available in thousands of jets but it reported a loss last year.
Gogo's shares, which touched a low of $15.50, were trading down 5.5 percent at $16.05 by early afternoon. Over 6 million shares changed hands at 1230 ET.
Josef Schuster, founder of IPO research firm IPOX Schuster, said that larger IPOs next week such as technology products retailer CDW Corp and construction supplies distributor HD Supply Holdings Inc would need to be conservative while pricing their offerings.
On Wednesday and Thursday, as the Gogo offer was being priced, U.S. stocks endured their worst two-day decline since November 2011 after Fed chairman Ben Bernanke laid out plans to pull back on Fed stimulus.
Gogo, which is looking to tap growing demand for in-flight internet and entertainment among business travelers, first filed to go public in 2011.
"It was our international expansion that prompted us to go (public) now," Chief Executive Michael Small told Reuters.
Gogo's consolidated revenue grew 46 percent to $233.5 million in 2012, but posted a net loss of $32.7 million. Its debt stands at about $130.5 million, according to its filing.
IPODesktop.com's Francis Gaskins said the company would face increasing competition and a limited market.
"If they can't make money with an 81 percent market share then, with increasing competition, when can they make money?"
Gogo, whose services can be accessed by WiFi-enabled devices using internet passes priced at $14 for a day and $44 for a month, faces competition from ViaSat, Row44, Panasonic Avionics and Thales.
The company was formed in 1991 after founder Jimmy Ray doodled the concept of an in-flight telephone system on a paper napkin in a barbecue restaurant in Denison, Texas.
Gogo's services are available in 1,900 commercial aircraft operated by nine North American airlines including Delta Air Lines, US Airways and American Airlines, representing 81 percent of all internet-enabled commercial planes as of April 30.
The company also provides internet, voice and data services to more than 5,750 business aircraft, and sells equipment and services to aircraft makers such as Bombardier Inc (BBDb.TO), General Dynamics Corp's (GD.N) Gulfstream, and Brazil's Embraer (EMBR3.SA).
(Reporting by Aman Shah and Neha Dimri in Bangalore; Editing by Saumyadeb Chakrabarty)