Provo-based Ancestry.com and its owners raised about $100 million as it offered its shares for sale Thursday for the first time on the Nasdaq stock exchanges.
The company sold a little more than 4.07 million shares at an initial price of $13.50 apiece. Existing investors sold an additional 3.33 million shares.
The firm's revenue comes from subscribers wanting to trace family histories by using the company's large document data bases, lists and other information.
In the first day of trading, company shares rose 70 cents, or 5.2 percent, to finish the day at $14.20. The shares traded as high as $16.32 during the session.
The company's share of the sale was about $55 million. In its prospectus, Ancestry.com said it might use some of the new capital for acquisitions of other companies, new products or technologies.
The company declined comment Thursday, citing a required "quiet period" that will last until about another month.
Ancestry.com, based in Provo, has 1.1 million paying U.S. users and its IPO priced the stock less expensively than similarly sized Web companies, said Eric Guja, an analyst at IPO boutique Renaissance Capital LLC in Greenwich, Conn. The biggest question now is whether enough people want to trace their family tree online to let the company grow as much as some investors expect, he said.
"They're the leader in the market, with six times the traffic of their closest competitor in the U.S.," Guja said. "Their profit margins are impressive."
Ancestry.com's sales grew 14 percent in the first nine months of the year to $164.8 million, according to company filings. Revenue has climbed an average of about 13 percent annually since 2004.
Five of the last nine IPOs have closed below their offering price in the first day. But experts say that shouldn't be the case for Ancestry because technology IPOs have collectively performed about twice as well as other sectors so far this year.
The company is a profitable niche market leader and it's growth story will likely resonate well with investors, said Scott Sweet, senior managing partner at IPO Boutique, who is optimistic about the stock debut.
"Currently they're alone out there, and for the time being their financials are showing it," Sweet said. "There is definitely strong demand for researching and building a family tree, and the people who do get involved with this really get deeply involved, going as far back as the software will allow them out of curiosity."
Ancestry's customers also can collaborate with other subscribers. That gives it the edge of a social networking Web site, Sweet said.
Francis Gaskins, president of IPOdesktop, said on-demand software, or the "log me in" segment, has been strong during the economic downturn. Ancestry, which relies heavily on recurring revenue from annual subscriptions, has funded its growth through internal cash flow.
"At first blush, some may think this looks like a high price-earnings ratio, but compared to other companies in the broadly defined segment it's a very attractive price," Gaskins said.
It's unclear how large the potential market is for its products, however, because Ancestry is something of a pioneer in online genealogy, said Guja.
"This deal in particular will appeal to a specific kind of investor base," Guja said. "This is a unique company that's invested more than $80 million to build up its content, and it will continue to benefit from its large user base."
Underwriters for the deal include Morgan Stanley, Bank of America-Merrill Lynch, BMO Capital Markets Corp., Jefferies & Co. and Piper Jaffray & Co. It will trade under the symbol "ACOM" on the Nasdaq Global Market.
Founded in 1983 as Ancestry Inc., the company started out publishing books to help genealogy buffs research family lineage and moved to Web-based documents and tools. With more than 600 employees, Ancestry.com was spun off from The Generations Network, a group of businesses offering other Web tools, DNA testing services and Ancestry magazine.
The president, CEO and director of the company, Timothy Sullivan, was president and CEO of Match.com, a dating site run by Internet company IAC/InterActiveCorp., before joining Ancestry in 2005.
2004 » Extra Space Storage Inc., offered at $12.50, closed Thursday $10.13
2005 » Huntsman Corp., offered at $23, closed Thursday $8.11
2006 » Omniture Inc., offered at $6.50, quit trading at $21.52 after takeover by Adobe Systems
2007 » EnergySolutions Inc., offered at $23, closed Thursday at $9.01