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Talk about good fortune. Powersoft Corp. of Burlington, Massachusetts, a hot company in a red-hot new-issues market, has brought just that for founder, chairman, and chief executive officer Mitchell E. Kertzman and CFO John J. Gannon. Hitting the market at the peak of its passion for software issues last February, Kertzman and Gannon, with the help of Goldman, Sachs & Co. and Alex. Brown & Sons, pulled off one of the most remarkable initial public offering of the two-year boom in IPOs.
Powersoft. a leader in the emerging client/server software market, submitted a preliminary "silent" filing to the Securities and Exchange Commission last fall. with an offering price of $13 to $15 a share in mind. In the red herring prospectus filed January 15, 1993, it estimated a slightly higher range of $14 to $16. But over the next two weeks, eager receptions at road-show presentations in 10 cities prompted a raise to $19-$20 in the amended prospectus. Sensing a sellout, Powersoft pegged the price at $20 in the final pricing meeting before the February 3 offering. And then, whoosh! From $20, Powersoft's very first trade crossed the tape at $32. After zooming to $40, the stock closed its first day of NASDAQ trading at just over $38. "Watching those prices flash by in Goldman's trading room, I was taken by surprise," recalls Gannon.
The price backed off, of course. Says Gannon: "It was a pretty tough stock to hold on to" at 76 times projected 1993 earnings estimates of 50 cents per share. Says Chip Morris, portfolio manager of T. Rowe Price Associates's Science and Technology Fund: "No one got very many shares, and with an 80 percent profit right out of the box, you had to be an idiot nor to sell.
But Powersoft's stock didn't fall far. With analysts bumping up 1993 estimates to 55 to 60 cents as soon as the month-long "quiet period" on research reports ended. and forecasting 75 to 80 cents for 1994, Powersoft has traded steadily in the $25 to $32 range since the offering--twice the level Kertzman. Cannon. and their investment bankers foresaw last fall. Despite a bulge in short sales plus general nervousness about technology issues. the stock began the summer in the $26...