SAN FRANCISCO (08/09/2000) - Investors gave AOL Latin America the benefit of the doubt in its market debut Tuesday, with shares rising 5.5 percent at market close despite many analysts' objections that all the company had to show for itself was a respectable family name.
"I feel it's a good performance. Usually when a company prices at the lower end of its range, it tends to trade lower, not higher, on its first session," says Will Landers, Latin American Internet analyst at CSFB. "Investors are showing interest, and they want to see if the company can build a good brand in the region."
After repeatedly delaying its IPO, AOL Latin America, a joint venture between AOL and Venezuela's Cisneros Group, had to slash the price of its offering by 50 percent, from $15 to $17 down to $8 to $10. The company finally priced 25 million shares at $8, which amounted to $200 million, way below the $425 million it expected to raise originally.
Nevertheless, AOL Latin America's IPO is the first one for a company targeting Latin America since April's market crash gutted that region's sector. As a result, even the company's toughest regional competitors seemed relieved that the deal finally got done.
"This could help improve market sentiment toward the region, and that's good for everyone involved in this market," says Fernando Espuelas, chairman of StarMedia Networks in New York.
Some observers believe the AOL Latin America IPO could revive some of the lost luster of a region that is still among the fastest-growing for the Internet industry worldwide. "Latin America is all about potential. It offers an incredible opportunity for growth," says Lucas Graves, Latin American analyst at Jupiter Communications Inc. (JPTR) .
In the view of Henry Blodget, Internet analyst at Merrill Lynch (MER) , AOL is off to a strong start. "AOL has demonstrated its ability to come from behind in a major market in the U.S.," he says.
As its shares were testing the market waters on Wall Street, AOL Latin America's top brass was in Buenos Aires at a lavish party unveiling the Argentine portal and service provider. AOL entered the region last November when it opened in Brazil, and launched operations in Mexico last month. The three countries make up 70 percent of the region's market, but AOL has said it plans to be in every country in the continent by the end of next year.