Wi-Fi Business Hopes Stock Connects on Wall Street

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Wi-Fi Business Hopes Stock Connects on Wall Street
Sky Dayton

The outlook for next week’s initial public offering of Wi-Fi network operator Boingo Wireless Inc. is looking better thanks to public interest in … aircraft leasing?

Air Lease Corp., a Century City jetliner company started by billionaire Steven Udvar-Hazy, outperformed expectations last week when it raised nearly $900 million in its public market debut. The strength of the offering could generate momentum in the IPO market and lift the prospects for upcoming public offerings in various industries, some analysts said.

“A lot of people on the street were very, very happy to see this IPO do well,” said John Fitzgibbon, owner and publisher of research site IPOScoop.com. “It could open the door for others.”

Boingo, a 10-year-old Santa Monica company, is hoping that turns out to be true. The builder and operator of wireless networks across the globe is expected to price its IPO after markets close May 3 and begin trading the next day on the Nasdaq Global Market under the apropos ticker “WIFI.”

According to its latest regulatory filing, Boingo plans to offer as many as 5.8 million shares at a price between $12 and $14 apiece, which could raise more than $80 million. The company declined comment due to the pending IPO.

To be sure, offerings from disparate industries do not necessarily influence each other and whatever momentum one public offering generates can be lost quickly. But Fitzgibbon said he wouldn’t be surprised to see Boingo benefit from the strength of the IPO market and surpass expectations. Investors have shown enthusiasm for tech stocks in particular and now “buyers are lining up” for Boingo’s IPO, he said.

“It should be a smashing hit,” Fitzgibbon said. “A lot of people are waiting for this one to get priced.”

Strong offering

Air Lease demonstrated last week that investors are willing to shell out for the right opportunity.

The company registered the largest ever IPO in the jet-leasing industry when it sold 34.8 million shares, including the full overallotment, for $26.50 each, raising a total of $868 million after expenses. In just three days of public trading, shares rose 9.6 percent to close at $29.05 on April 21.

Joe Gill, an analyst at Bloxham Securities in Dublin, Ireland, said in a client note that Air Lease’s IPO showed that “specific business models attached to strong management teams can attract material amounts of equity capital.”

Still, the showing was something of a surprise for a company just over a year old. Air Lease launched in February 2010 and now has a fleet of about 50 aircraft that it leases to airlines.

Air Lease was started by Udvar-Hazy, who is credited with creating the industry in 1973 when he launched International Lease Finance Corp. He remained with the company even after selling it to American International Group Inc. in 1990. He finally left early last year after AIG was taken over by the government amid the financial crisis. Last week, after the smashing Air Lease IPO, he publicly stated his desire to one day buy back ILFC.

Nick Einhorn, an analyst for Greenwich, Conn.-based IPO-tracking firm Renaissance Capital, said it likely was the pedigree of management that helped Air Lease’s IPO surpass expectations. Still, he said the offering also reflected the strength of the overall IPO market.

There have been 47 IPOs to date this year, compared with just 30 last year, according to Renaissance data.

“That’s a pretty sizable increase year over year,” Einhorn said. “We’re not at dotcom-era levels or anything like that, but (we’re) sort of hitting the level we were at in 2005 to 2007 before the crisis hit.”

What’s more, the companies going public have tended to do well after the initial offering. On average, shares of this year’s newly public companies are up 10 percent, he said. Tech stocks, in particular, have done well.

Last month, San Francisco’s ServiceSource International, which caters to tech firms, raised $119 million in its debut, 21 percent more than expected. Shares are trading more than 16 percent above their initial offering price. Last week, 21Vianet Group, a Beijing Internet data center services provider, raised $195 million in its IPO, a 54 percent increase over original expectations.

Boingo, which has a large presence in Asia, is hoping to follow in 21Vianet’s shoes. The company has racked up several major partnerships with cellular service providers such as Verizon Wireless and now boasts more than 200,000 Wi-Fi hot spots worldwide.

Unlike some other tech companies, Boingo, founded in 2001 by Internet entrepreneur Sky Dayton, has become profitable. The company earned nearly $11 million last year on revenue north of $80 million.

Though Einhorn noted that not every IPO has done well, he said the public markets are clearly welcoming to new profitable companies.

“Investors are judging these companies on their own merits,” he said. “But certainly the activity we’ve had so far this year is positive for the companies looking to go public.”

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