NEW YORK-Wall Street gave Omnipoint Corp. a resounding welcome Friday, buying seven million shares of an initial public offering of common stock that opened the trading day on Nasdaq at $16 per share. Near close, the stock was trading at $20 per share. Omnipoint, which raised $112 million in its IPO, is believed to be the first pure play in personal communications services to tap the public capital markets.
The share price was well above the $13 to $15 range estimated in the company’s preliminary prospectus. The number of shares sold also greatly exceeded the five million anticipated in the preliminary offering statement.
Proceeds raised from the sale will be used primarily for interest payments on the 30-megahertz pioneer’s preference license, which the Federal Communications Commission granted Omnipoint in late 1994 for the New York major trading area.
According to the preliminary prospectus for the stock sale, Omnipoint hopes to begin offering commercial PCS services in the New York City area by autumn. It also hopes to be the first company to provide such services to the area, where the population of nearly 26.8 million makes it the largest MTA in the United States.
Any net proceeds remaining after the pioneer’s preference license interest payments are made may be used-along with existing company funds-toward licenses in other FCC auctions. The money also may be used as working capital for the New York MTA operations and/or for other corporate purposes.
The IPO will inject needed cash for expansion into the Colorado Springs, Colo., company, which has incurred cumulative net losses of about $70 million since its founding in 1987 through Sept. 30.
Since its incorporation, Omnipoint has worked to develop proprietary technology for digital wireless applications, including mobile network systems and wireless local loop. Its technology is being integrated with wireless Global System for Mobile communications networks and local telephone switching platforms.
Omnipoint’s long-term business goal is to become a leading provider of both PCS services and products. However, each PCS provider is free to select among competing technologies, which may be incompatible with each other. This risk is one that investors in the IPO assume, should the PCS marketplace adopt a universal technology that doesn’t work with the Omnipoint/GSM system.
After completing the IPO, Omnipoint had about 42 million shares of common stock outstanding. Most of the privately held common stock, with a par value of 1 cent per share, will be offered publicly later this year, following the IPO.
Of the 150 parties who owned the stock outstanding prior to the public offering, Douglas E. Smith, founder, president, board chairman and chief executive officer of Omnipoint, is the single largest shareholder.
Allen & Co., a New York bank that is part of the IPO underwriting syndicate, also owned several million shares of privately held stock prior to the public offering. Donaldson, Lufkin, Jenrette Securities Corp., New York, managed Friday’s stock sale.
