* Shares finish first day of trading up nearly 40 pct
* No plans for follow-ons, or acquisitions-CEO
* IPO part of marketing plan
(Adds final stock price, comment from NYSE)
By Phil Wahba
NEW YORK, April 16 Rosetta Stone Inc (RST.N)
shares finished their first day of trading up nearly 40 percent
Thursday, following the company's initial public offering,
making it the strongest start of a new stock in nearly a year.
Rosetta Stone, which provides language instruction
products, opened trading at $25, on the morning after it priced
its IPO at $18, exceeding the estimate range.
Rosetta Stone shares closed at $25.12 on the New York Stock
Exchange, making its 39.6 percent jump the strongest first-day
performance since fertilizer maker Intrepid Potash Inc (IPI.N)
rose 58 percent in its debut in April 2008.
Arlington, Va.-based Rosetta Stone sold 6.25 million
shares, netting proceeds of $112.5 million in its initial
public offering on Wednesday.
Backed by a group of private equity investors, Rosetta
Stone's IPO is the first buyout-backed offering in five months,
according to Thomson Reuters data.
The strong performance raises the question as to whether
the company could have priced its IPO more aggressively, a
notion Rosetta Chief Executive Tom Adams dismissed on
"We are a long-term oriented group and we deliberated ...
it's hard to pick the right price, but we're comfortable with
it," Adams told Reuters in an interview.
Despite the small size of the stock float and the high
demand for the stock, the company has no plans for now for a
follow-on, or for acquisitions, Adams said.
The IPO will net Rosetta Stone about $48 million (half the
deal's total proceeds are going to existing shareholders), but
the greater benefit of the deal will be higher brand
recognition, Adams said.
"Large institutions, companies and government agencies will
have more trust in a publicly listed company and that will help
business," Adams said. "It elevates our profile. We have a
dominant brand and this will strengthen it."
Building recognition is central to its efforts to
strengthen international sales, which account for only 5
percent of business, but which analysts say are crucial to
maintaining its growth.
In 2008, Rosetta Stone's revenues rose 52 percent to $209.4
million from 2007, with net income of $13.9 million, according
to a regulatory filing.
Rosetta Stone's successful pricing came a day after college
operator Bridgepoint Education Inc (BPI.N) had to settle for 30
percent less than its original estimate to get the deal done.
But Bridgepoint, a growing, profitable company, faces
stiffer competition than Rosetta Stone, which is the first
stand-alone language training company, an analyst said.
"People are starved for companies that have good internal
growth and positive cash flow," said Francis Gaskins, president
of research firm IPO Desktop. "But Rosetta benefited from a
lack of publicly held competitors."
Rosetta Stone, which provides instruction services in 31
languages to individuals, companies and schools primarily
through CD-ROMs, has attracted attention through an advertising
campaign that has featured U.S. Olympic swimming gold medal
swimmer Michael Phelps.
The IPO's underwriters were led by Morgan Stanley (MS.N)
and William Blair & Co.
Rosetta Stone's IPO is the fourth so far on a U.S. exchange
in 2009 and the third in April, making it the busiest month for
new stock flotations since July 2008, raising hopes the IPO
market is reopening.
"It's cause for optimism," said Scott Cutler, the head of
listings at New York Stock Exchange's parent NYSE Euronext Inc
"We have deals of similar size that will be launched soon
-- that doesn't mean floodgates are open but there is a good
foundation for more IPOs," Cutler added.
Still, there have only been three IPOs by U.S. companies --
a fourth IPO was by Chinese video game maker Changyou.com Ltd
(CYOU.O) so far, the fewest number since 1975.
There are currently no other IPOs on the calendar.
(Reporting by Phil Wahba, editing by Matthew Lewis and Gunna