The threat of family feuds and a worldwide slump in hotel reservations couldn't dampen Hyatt Hotels Corp. (H) on its first day of trading on the New York Stock Exchange. The high-end hotel chain rose more than 12 percent on Thursday after raising $950 million in its initial public offering the prior evening.
What's driving the strong performance? It certainly doesn't hurt that the S&P 500 enjoyed its fourth straight day of gains, rising about 1.8 percent. But investors pushed Hyatt's shares from $25, where they debuted, all the way up to $28 on the strength of its well-known brand and healthy cash flow, analysts say.
That's in spite of what's sure to be a somewhat fraught relationship between new investors and the Pritzker family, Hyatt's founders, who retain much of the company's stock and a majority of the voting stock. And the family's own internal machinations may prove detrimental to the company as well, a risk serious enough that Hyatt specifically disclosed it when filing paperwork for the IPO.
Nonetheless, investors are finding much to like, says Scott Sweet, senior managing partner at research firm IPO Boutique. The stock's $25-a-share price was toward the top end of a $23-to-$26 range sought by Goldman Sachs (GS), its underwriters.
"At the start of the week there was vast speculation if the Hyatt IPO would price in range given the economy, structure of the company, and some fears that investors would have little control," Sweet said.
"Then the facts of Hyatt's strong cash position and pricing compared to its comps; and it started to gain significant retail and institutional interest," he added.
Even though there have been slightly more IPOs this year than in 2008, the total value of initial offerings since January has fallen 24 percent compared to a year earlier. As bad as that may sound, it's important to remember that the IPO market completed froze last fall as the credit crisis intensified, making this year's figures even more worrisome.
Hyatt's strong first day of trading is comforting, then, to investors who fretted about the poor performance of recent debuts by the likes of Dole Food (DOLE), which didn't fetch as much as its underwriters had hoped and has fallen even further since its IPO on Oct. 26.
Investing in Emerging Markets
Learn to invest in a globalized world.View Course »