Wireless broadband service provider Clearwire
After pricing at the top of a forecast range, the shares initially climbed to $27.95 but then turned around. They were among the most actively traded stocks on Nasdaq.
On Wednesday, Clearwire raised $600 million with a 24 million share offering of Class A stock, increased from 20 million shares. The shares were sold at $25 each, at the top end of a forecast range of $23 to $25.
Roe Equity Research analyst Kevin Roe said that while Clearwire attracted a lot of attention because if its backers, it faces financial and technology risks.
"The investors for this stock are high-risk investors ... This is a very early stage high-risk mobile investment that is not generating profit or cash flow and will not for many years to come," Roe said.
The U.S. wireless market already has four national service providers fighting bitterly for a shrinking pool of new subscribers. The market leader is Cingular, owned by AT&T, and Verizon Wireless, owned by Verizon Communications and Vodafone Group
"The business model for Clearwire today is not what's driving the valuation," said Roe, adding that the company needs additional cash to build out its network.
"What's driving the valuation is the long-term expectations for mobile WiMax," he said, referring to a future version of the technology Clearwire is using to blanket cities with high-speed wireless Internet access.
The current technology provides wireless links for laptop and desktop computers but not mobile phones. Bigger rival Sprint Nextel Corp
Clearwire's IPO garnered a lot of interest because of the involvement of McCaw, who sold McCaw Cellular Communications to AT&T in 1997 for $11.4 billion, and the fact that Intel
Merrill Lynch & Co., Morgan Stanley and JPMorgan led a group of 10 underwriters, which have an option to buy an additional 3.6 million shares of Class A stock to cover over-allotments, according to an underwriter.