Deutsche Banc Alex. Brown took a company public yesterday whose shares leaped 525 percent, the largest first-day gain in an initial public offering this year.
Shares of Foundry Networks Inc. closed at $156.25, up $131.25 after being priced by Deutsche Banc Alex. Brown at $25 a share. The company sold 5 million shares, a 9 percent stake.
Foundry's shares started trading at 1: 45 p.m. on the Nasdaq stock market at $114 a share, although some traders using other electronic systems bought and sold shares at $109. Within three minutes, more than 1 million shares traded, and by day's end more than 12 million shares had exchanged hands.
By the close of trading, Foundry's market capitalization -- outstanding shares multiplied by its price -- stood at $8.7 billion, and the value of shares owned by Bobby R. Johnson Jr., chairman and chief executive officer, who makes a salary of $139,000, had leaped to $1.9 billion.
The Sunnyvale, Calif.-based Foundry makes high-performance switching equipment that manages Internet traffic. Its largest Internet customer is America Online Inc. Other customers include Microsoft Corp., AT&T; WorldNet and Hewlett-Packard Co.
Investors clamored for the shares yesterday because they believe that companies that make the switches to direct Internet traffic have tremendous potential. In addition, Foundry is already turning a profit, which is unusual for hot Internet companies. It made $3 million in the six months that ended June 30.
This isn't the first high-profile IPO that Deutsche Banc Alex. Brown has taken to market this year. In January, the firm was lead underwriter for Market- watch.com, which jumped $80.50 on its first day of trading, to $97.50.