It's been a tough year for Internet stocks, but you wouldn't know it looking at a hot stock offering by CoStar Group Inc.(CSGP) late last week.
The Washington, D.C.-based commercial real-estate data provider raised about $529.2 million in a stock offering late Thursday, after fees to its bankers and the sale of some additional shares by underwriters.
The deal adds to recent evidence that investors are getting comfortable with Internet stocks again, following a selloff earlier this spring. It also marks a vote of confidence for CoStar's ability to boost profits and revenue through acquisitions, its stated purpose for doing the deal.
"We're definitely actively out there looking at deals of all shapes and sizes," CoStar Chief Financial Officer Brian Radecki said in an interview Monday. He sees more acquisition candidates marketing themselves for a takeover "than I’ve ever seen in almost 20 years."
CoStar's 132% share-price rally since its acquisition of LoopNet Inc. in 2012 has made investors more interested in helping it build a war chest for purchases, according to two fund managers with large positions in the stock. That purchase expanded CoStar's business running online marketplaces that connect buyers and sellers of property.
By all indications, last week's stock offering saw strong demand. CoStar sold 50% more shares than it had originally planned, at $160 apiece, 0.6% higher than the stock's closing price before the deal's announcement on June 2. Typically stock offerings price at a discount, to lure money managers to snap up a big chunk of shares in a deal.
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The shares rose 4.5% Friday, in part driven by investors who couldn't get as many shares as they wanted in the deal, according to a person familiar with the matter. Monday, shares were up nearly another 1%.
"More than 50% of buyers in the deal were new investors," rather than existing holders adding to positions, Mr. Radecki said. "There was a significant demand from new investors that were trying to get into the story."
The high level of demand also suggests money managers are tiptoeing back into high-growth tech stocks. Many of these shares have stabilized since the violent pullback the sector saw in March and April (which, by the way, burned buyers in a spate of big tech stock sales that took place at the start of this year).
CoStar wasn't spared the carnage, falling 30% from its March 4 record close to its 2014 closing low on May 20. But since bottoming out, the shares have seen less volatility.
J.P. Morgan Chase (JPM) & Co. led the stock offering with Goldman Sachs Group Inc.(GS), Bank of America Merrill Lynch and Citigroup Inc.(C)
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