2 Television-Related IPOs Get Warm Reception From Investors

Investors tuned into two TV-themed initial public offerings on Thursday, as the strong market for new stocks powered ahead.

TiVo Inc., whose service lets viewers stop, rewind or play back a television broadcast, rose 87% in its first day of trading.

The Sunnyvale, Calif.-based company (ticker symbol: TIVO) surged $13.94 to close at $29.94 on Nasdaq, giving the company a market value of $1.1 billion. Through June 30 it had a mere $8,000 in total sales.

“Personal video recorders like TiVo will be the hottest electronics category in history,” said Josh Bernoff, an analyst at Forrester Research.

Shares of Acme Communications Inc. (ACME) surged $8, or 35%, to $31 on Thursday in their debut, a ringing Wall Street endorsement of the owner of nine stations affiliated with the WB network.

The gain gave the Santa Ana-based company a market value of about $519 million, based on the 16.75 million shares outstanding. At the stock’s closing price, co-founder Jamie Kellner’s 5.3% stake in the company was worth $27.4 million. Volume surpassed 7 million shares--the initial offering was for 5 million--as some shares changed hands more than once during the trading session.

On Wednesday, Acme’s IPO was priced at $23 a share, above the $19-$21 range the company had projected in regulatory documents.

Acme’s stations are all affiliates of the WB--the upstart TV network that has carved out a niche among younger viewers with such shows as “Buffy the Vampire Slayer” and “Dawson’s Creek.”

Acme’s head, Kellner, is the founder and chief executive of the WB network and a former head of the Fox television network. The WB is controlled by Time Warner, in partnership with Tribune Broadcasting, a unit of Tribune Co.

Acme isn’t profitable--it lost $16.2 million in the first six months of this year on revenue of $26.6 million--but investors were apparently attracted by the company’s positive cash flow, said Vincent Slavin, who follows new issues for Cantor Fitzgerald Inc.

“The market is going wild over the only growth story in television,” said James Marsh, an analyst at Prudential Securities. Marsh said the offering represents investor interest in riding the WB’s success, and that it should encourage Tribune to spin off its broadcast group from its slower-growth newspaper holdings.

Tribune says 70% of the value of its broadcast group is tied to the WB. Yet Tribune stock is valued at a much lower multiple of cash flow than is Acme.

Marsh said that based on Acme’s IPO, a spinoff of Tribune Broadcasting would add $7 a share, or $1.6 billion in value, to Tribune’s own stock price. Tribune closed Thursday at $49.75, up $1.81 on the New York Stock Exchange.

Although shares of such station groups as Sinclair Broadcasting have taken a hit recently because of stiffer competition for national advertising with the networks, radio, newspapers and cable, Marsh said Acme probably will be able to sidestep the turmoil because its stations are just establishing themselves and are less dependent on national advertising.

Acme plans to use a good portion of the $115 million in proceeds from the offering to pay down its debt. The company plans to repay $39.4 million it owes under its credit facility, and pay off $15 million in debt it owes for the acquisitions of television stations in Dayton, Ohio; Green Bay, Wis.; and Champaign, Ill.

About $24 million will be used to pay for the acquisition of KASY-TV, a station in Albuquerque, N.M.

Acme trades under the symbol ACME on the Nasdaq market.

Deutsche Banc Alex. Brown handled the IPO, with assistance from Merrill Lynch & Co., Morgan Stanley Dean Witter and CIBC World Markets.