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FreeMarkets is the easy winner in having the biggest stock price increase
Sunday, April 09, 2000 By Ken Zapinski, Associate Editor/Business
FreeMarkets Inc.'s 1999 stock performance -- a better than 600 percent jump from its initial public offering price of $48 to its year-end close above $341 -- was the best in Greater Pittsburgh last year.
The story behind the numbers is even more impressive.
Throughout last year, the enormous gap between IPO prices and the closing price at the end of the first day of trading raised questions of how well the investment bankers were doing their job.
One-day price jumps of 400 percent made for nice headlines, but they seemed to indicate that the offerings were woefully underpriced.
That meant fledgling companies missed out on receiving tens of millions of dollars that could help them grow their business. The IPO windfalls instead went to the broker favorites lucky enough to get in on the ground floor.
But FreeMarkets co-founders would have none of it. CEO Glen Meakem and Executive Vice President Sam Kinney were confident that they had a sharp idea that would transform business purchasing around the world.
And as investors became more excited in the days leading up to the Dec. 10 IPO, FreeMarkets boosted its IPO price from as low as $14 per share to $48.
In the wake of FreeMarkets' success, many more tech IPOs became much more aggressive in pricing their initial offerings.
FreeMarkets caught the height of the business-to-business e-commerce, or B2B, craze.
The company's concept is simple: Scour the globe for suppliers of anything from coal to printed circuit boards. Have them gather on the Web, toss a customer's supply contract in the middle and have them duke it out. Watch the customer smile as his price plummets.
Investors of late have been much more critical, some questioning whether FreeMarkets' business model has more in common with an Old Economy consulting firm than a New Economy e-commerce company. In the first quarter, FreeMarkets shares dropped about 50 percent.
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