Peet's up 17% on first day

January 25, 2001: 5:44 p.m. ET

Peet's Coffee, first IPO of the year, sees gains after pricing low

NEW YORK (CNNfn) - The new year got off to a steady start for initial public offerings, as shares of Peet's Coffee & Tea Inc. rose about 17 percent in its first day of trading.

Shares of Peet's (PEET: Research, Estimates) rose $1.38 to $9.38 on the Nasdaq.

David Menlow, president of IPOFinancial.com, said he expected the small 13 cent gain the stock opened with, but was interested in the aftermarket rise which suggested a market more knowledgeable about valuations.

"The environment appears to be more seasoned," Menlow said.

The stock rose to an intraday high of $9.69, before settling later in the day at just above $9.

"I was really surprised it made it as high as it did," Menlow said. "It's a very auspicious beginning for this stock."

He added that while this IPO couldn't be seen as a lead indicator for the new issues market in 2001, it is "a promising sign."

Peet's CEO Chris Mottern told CNNfn he was excited to be the first IPO of the year and was very pleased with its first day gains.

Peet's priced shares Wednesday night at the bottom of an already reduced range, raising $24.6 million.

The 34-year-old company based in Emeryville, Calif., hopes to compete with the likes of Seattle's Starbucks Corp. (SBUX: Research, Estimates). On Tuesday, Peet's cut its terms to 3.3 million shares at $8-to-$12 each, down from $10-to-$14 -- a sign of diminished demand.

But Mottern said he was not disappointed at shaving the $15 million offering and did not considering postponing or delaying.

"When we set the IPO price range it was September or October, and now the market conditions have set the pricing," he said. "We are very pleased with where the stock is positioned now.

Peet's, which sells coffee in four states, makes most of its money from the sale of whole-bean coffee. For the nine months ended Oct. 1, Peet's lost $2.7 million on revenue of $59.4 million.

Through its lead underwriter WR Hambrecht, Peet's used a Dutch auction to sell its shares. The process, in which the price of the shares is gradually lowered until it meets a bid and gets sold, is meant to ensure an efficient and fair marketplace for selling shares in an IPO.