Shares in Web site MP3.com tripled yesterday in a public offering that turned its founder into a billionaire in a few hours and left Wall Street analysts astounded.
After increasing the price of the initial public offering to $28 a share, MP3.com opened for trading at $92 and then rocketed to $105. By the end of the day it was sitting at $72. At the peak share price of $105, the music download portal was almost worth a whopping $7 billion.
This astonished Wall Street analysts and traders, even by the standards of the Internet stock frenzy that has hit the US. MP3.com is an advertising supported Web site, which had losses of $1.5 million on revenue of just $665,785 in the quarter ending 31 March.
Many in Wall Street thought that the inflated price was due to investors believing that that MP3.com is the exclusive owner of MP3 technology. In fact it is just a music download site.
MP3 itself, a technology that compresses music files at near CD quality for easy transmission over the Internet, is still not free from controversy. Although it has been adopted by consumers, the record industry still believes that it leaves the Internet wide open to music piracy.
MP3.com plans to use the $344 million it raised with the 12.3 million share offering to turn itself into the ultimate digital portal for music.
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