OpenTable Inc. (NASDAQ: OPEN) came into the world with a bang on Thursday, shooting from $20 a share to a peak of $33 before settling down for the week at $28.75. A 44% gain makes this the second strong initial public offering (IPO) for a venture-backed company, following the SolarWinds Inc. (NYSE: SWI) debut the day before.
Originally, OpenTable planned a price range of $12 to $14, which crept up to $16 to $18, and eventually to its final level of $20.
There's already some skepticism about OpenTable's long-term prospects in the public markets. The company is small, with only $56 million in revenue last year and a loss on that of $1 million. And, restaurants are struggling with a worldwide recession, which puts fewer people in seats and thins the crowds at the bars waiting for tables. It remains to be seen whether an aggressive global expansion strategy can offset a decline in web- and phone-based restaurant reservations (off 10% to 15% in the last quarter of 2008).
There is plenty of room in the market, though. At present, OpenTable's network includes 10,000 restaurants and serves 3 million guests per month. The company estimates that 30,000 reservations take reservations in North America, totaling 600 million diners.
To its credit, OpenTable is starting with small steps. The company issued only 3 million shares and brought in $60 million in the May 21, 2009, IPO. Right now, testing the waters is probably the best move.
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