Investors flocked to Zipcar Inc. on Thursday, its first day as a public company, sending the car-sharing service's stock soaring 56 percent.
That performance means Zipcar had one of the best initial public offerings of 2011 in terms of first-day increases for its stock. It trails only Qihoo 360 Technology Co., which went public in March and climbed 135 percent that day.
Zipcar shares priced at $18 on Wednesday night, totaling $174 million. The stock had soared to $28 by the time the markets closed Thursday. That was far above the company's original projections of $14 to $16 per share.
The warm reception also led investors who had already been backing the company to cash out more shares than they originally planned -- about 3 million shares versus 1.7 million.
Investors were also closely watching the IPO of Arcos Dorados Holdings Inc., the largest franchisee of McDonald's Corp. restaurants. Its stock climbed 25 percent.
However, investors didn't reward the IPO market wholesale. Two other companies that went public Thursday, TMS International Corp. and Box Ships Inc., fell after opening.
Analysts said that Zipcar's success was partly a result of its name recognition and cool factor, and they cautioned that its red-hot performance can't last forever.
About 11.3 million shares changed hands Thursday, though the company offered only 9.7 million, so some investors were flipping their shares and getting out immediately.
Scott Sweet, managing partner of IPOBoutique.com, called Zipcar a "cult stock," meaning that some of its investors are people who like Zipcar as a service, not necessarily people who have examined the company's financial statements.
He compared the phenomenon to doughnut lovers who bought Krispy Kreme Doughnuts Inc., which is now trading at a fraction of its debut price in 2000.
"Cult IPOs have a history of doing well for long periods of time," Sweet said. "But if they ever miss their numbers, they get clobbered."
Francis Gaskins, president of IPOdesktop.com, said he thought both Zipcar and Arcos were over-valued on their first day. He said Zipcar should worry about competition from the rental car companies, like Enterprise Rent-A-Car, that have started rival car-sharing programs, and he questioned the depth of Zipcar customers' loyalty.
"When you rent a car, there's not much brand allure there -- who cares?" Gaskins said. "It's just, 'Can you get it?' and 'What's the price?'"
Zipcar sold another 6.7 million shares.
Zipcar has said it plans to use its portion of the IPO proceeds to pay down debt as well as for "the development of new services, sales and marketing activities."
The company, founded in 2000, has never turned a profit. In an interview with The Associated Press, CEO Scott Griffith declined to predict when the company might turn profitable. But he noted that paying down debt will free up capital. He said the company intends to keep a strong balance sheet because it's always borrowing to get more cars.
Griffith said there is still room to expand in the U.S., despite Americans' long love affair with their cars. But eventually, he said, the company expects only about 30 percent of its revenue to come through North America, with expansion focused on Europe and Asia.
Unlike a car-rental program, car-shares like Zipcar don't require customers to visit a store to pick up keys. Rather, members pay an annual fee, sign up to rent cars that happen to be parked nearby, and unlock them with their keycards. Also, Zipcar does not require customers to rent cars for an entire day.
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