[qi:053] When is a good thing too much of a good thing? It’s surely a question somewhere in the back of the minds of investors in VMWare (VMW). Since the stock went public two weeks ago — at $29 a share, 21% above its initial price of $24 a share — it has rocketed 150% to close Monday at $72 a share.
It’s now worth three times as much as underwriters first thought it was worth.
Did the lead underwriters mess up and leave tens of billions of dollars on the table? I don’t think so. If one were cynical, one would say Citicorp, JP Morgan and Lehman stand to gain more by priming the IPO pipeline with a superstar offering. The market for tech IPO’s now has a very appealing poster child.
Nor does EMC (EMC), VMWare’s proud parent, stand to lose much. EMC received a healthy portion of VMWare’s IPO proceeds. But its net earnings will also gain from the surging stock if it records its 87% stake in VMWare as investment income. As for VMWare itself, what it lost in potential proceeds, it could make up for in free branding.