BANGALORE (Reuters) - Shares of vacation rental website HomeAway Inc AWAY.O soared more than 50 percent on their market debut, as investors continue to be drawn to a slew of Internet companies that have gone public recently, but some analysts remained cautious.
HomeAway’s offering — which raised $216 million — follows a spate of IPOs by dotcom companies, including LinkedIn Corp LNKD.N, search engine Yandex NV (YNDX.O) and China’s Renren Inc (RENN.N) that have been lapped up by investors.
On Tuesday, HomeAway priced its IPO at $27 a share, valuing the company at just over $2 billion. Now, after the first day of trade, it is worth about $3.2 billion.
Shares of the company jumped 49 percent to close at $40.21 on Wednesday on Nasdaq. They had touched a high of $42.30, earlier in the session.
The IPO was underwritten by Morgan Stanley & Co, Deutsche Bank Securities, Goldman Sachs & Co and J.P. Morgan Securities.
“My response to this issue is utter shock,” David Menlow, president of IPOfinancial.com, said.
“As of today, we can officially declare the existence of the Morgan Stanley effect. If Morgan Stanley brings out a deal it’s going to open up much higher than it should.”
Morgan Stanley was among the key underwriters for both LinkedIn, Renren and Yandex IPOs.
“We weren’t too impressed with the HomeAway offering in the first place, so it is difficult to reconcile with the fact that it got this response,” Menlow said.
LinkedIn’s shares saw a flying start but have since given up some of their gains. Renren’s shares are now trading below their offer price.
Six-year-old Austin, Texas-based HomeAway rents out fully furnished, privately owned homes, condominiums and villas.
The company, which competes with Priceline.com PCLN.O, TripAdvisor and Wyndham Worldwide WYN.N, has about 560,000 paid vacation rental home listings around the world.
HomeAway has never posted a profit since its inception and in the three months ended March 31, 2011, the company posted a net loss of $7.5 million on revenue of about $52 million.
The company planned to issue 5.9 million new shares for the 8 million share offering. The remaining shares were to be sold by executives and shareholders, including Chief Executive Brian Sharples.
HomeAway, which counts Austin Ventures and Redpoint Ventures among its owners, said it would use the IPO proceeds to redeem preferred shares, issue dividends and for corporate purposes.
Additional reporting by Brenton Cordeiro in Bangalore, Editing by Joyjeet Das