Echo Global turns lower in first day of trading
NEW YORK -- Shares of Echo Global Logistics Inc., which provides transportation management services, lost ground Friday in their first day of trading on the Nasdaq.
The stock lost 18 cents, hitting, $13.82 in afternoon trading Friday on volume of more than 4 million shares. The stock had a short stint in the green earlier in the day.
The Chicago-based company, which first announced plans for the initial public offering in April 2008, raised $80 million by offering 5.7 million shares at $14 each. The underwriters have the option to purchase up to an additional 855,000 shares.
Echo Global has said it plans to use proceeds from the offering to expand its sales force, enhance its technology, make acquisitions, and for working capital and other general corporate purposes.
Echo Global acts as a middleman for companies, providing services on behalf of its clients through its carrier network of more than 16,000 transportation providers. Echo Global provides logistics services to more than 4,600 clients across a wide range of industries, including manufacturing and consumer products.
IPO analyst Francis Gaskins said investors aren't likely to aggressively go after the stock, at least initially, because of a recent acquisition and falling revenue this year.
The company bought trucking brokerage firm RayTrans Distribution Services Inc. on June 2 for $5.5 million in cash and an additional $6.5 million if RayTrans hits certain earnings benchmarks.
But Gaskins added that investors also see transportation and logistics companies as a good opportunity because they tend to lead the broader economy out of a recession. Most analysts believe that transportation demand has bottomed, and may soon show some signs of an uptick.
Also, because Echo does not own transportation equipment, overhead costs are low.
"It's a way to play the bottom of the economy," he said. "(Echo) has a low profit margin and there's not much room for error. But on a long-term basis, they are positioned for growth as long as their market segment grows."
The market for initial public offerings slowed to a crawl last year as the recession pressed on. But a recent broad rally in equities and a sense that investors' are again ready for IPOs is prompting a range of companies to go public.
Echo competes with other logistics providers including C.H. Robinson Worldwide Inc., Total Quality Logistics and Transplace, as well as trucking companies Schneider, JB Hunt Transport Services Inc. and Arkansas Best Corp.
The company was founded in 2005.
Morgan Stanley & Co. Inc. and Credit Suisse Securities (USA) LLC are joint book-running managers for the offering. William Blair & Co. LLC, Thomas Weisel Partners LLC, Barrington Research Associates, Inc. and Craig-Hallum Capital Group Inc. are co-managers.