Shares of Chegg, a textbook-rental business, fell as much as 20 percent in their debut on Wednesday, after the company priced its initial public offering well above the expected range.
With a debut high of $11.25, shares closed at $9.68.
Chegg's IPO of 15 million shares priced at $12.50 each, higher than the expected range of $9.50-$11.50.
"(The) income statement just does not support that high a price," said Francis Gaskins, a partner at IPO research company IPOdesktop.com. "They were losing too much money, and topline revenue is not increasing that much."
Chegg posted revenue of $213.3 million for 2012, up 43 percent from 2010. However, its net loss widened by 88 percent to $49 million in the period.
The company's shares opened at $11 on the New York Stock Exchange, 12 percent below their IPO price. The stock fell to a low of $10 in heavy trading, valuing the company at about $863 million.
Chegg, whose name is derived from the chicken-and-egg conundrum, would have been valued at more than $1 billion at its IPO price.