STR Holdings Inc. shares jumped Friday after the solar products company launched its initial public offering, but shares priced below expectations on the New York Stock Exchange.
Shares rose $3.10 from the offering price, or 31 percent, to close at $13.10. They priced at $10, which was below the expected range between $11 per share and $13 per share. A day earlier, the company cut its expected share price from a range of $13 to $15.
Underwriters made the right move by reducing the offering's price to $10, said John Fitzgibbon, founder of IPOScoop. The original price range was overly optimistic and a tough sell, he said.
Fitzgibbon added that bankers will ideally discount an IPO 15 percent to 20 percent against similar companies.
"There's a reason," Fitzgibbon explained. "IPO is a one-day sale." Investors show up when there's a sale and the price is right.
"The underwriters got the price right today."
The offering of 12.3 million shares includes 3.3 million shares offered by STR and 9 million shares offered by selling shareholders. Earlier the company had said STR would offer 2.3 million shares and selling shareholders would offer 10 million shares.
A spokesman for STR said total proceeds at this point are $123 million. STR will not receive any proceeds from the sale of the stockholders' shares.
STR's net proceeds will be used to pay off debt and fund working capital and general corporate purposes, the company said. Underwriters have the option to purchase up to an additional 1.845 million shares.
By going public, STR launches the first solar IPO on a U.S. index in over a year.
STR, based in Enfield, Conn., makes solar module encapsulants and provides consumer product quality assurance services. Encapsulants are specialty sheets and film that hold a solar module together and protect the semiconductor circuit.
This IPO launch comes just a week after energy infrastructure company AEI canceled its initial public offering after reducing its size and price range, delivering a blow to the U.S. IPO market.
It was the first company in 2009 to withdraw its IPO just before it priced.