By Laura Mandaro, MarketWatch
NEW YORK (MarketWatch) -- Changyou.com Ltd. shares climbed 25% Thursday after the Chinese gaming spinoff from Sohu.com drew strong support as the first initial public offering since February.
The surge in Changyou.com shares came after the company's IPO priced at the top of its estimated price range for its U.S. stock market debut.
Changyou.com /quotes/comstock/15*!cyou/quotes/nls/cyou (CYOU 26.33, -0.67, -2.48%) shares climbed $4.02 to close at $20.02 after debuting at $16 a share. The stock hit a low of $20.02 and a high of $23.93 on volume of nearly 9 million shares.
Signs of a strong debut came after the IPO pricing came at the top end of Changyou.com's estimated range of $14-$16 a share.
With 7.5 million American depositary shares in the IPO, the company raised $120 million.
The strong pricing comes after firms that buy initial public offerings heralded heavy demand for the unit of Sohu.com /quotes/comstock/15*!sohu/quotes/nls/sohu (SOHU 50.47, +0.12, +0.24%) . Sohu shares fell 3% to close at $42.31.
"It is multiple times oversubscribed to a very strong institutional and retail book," said Scott Sweet, senior managing partner at advisory firm IPOBoutique.com.
The Changyou offering marks the first U.S. IPO since infant formula maker Mead Johnson Nutrition Co. /quotes/comstock/13*!mjn/quotes/nls/mjn (MJN 54.88, +0.25, +0.46%) raised $828 million in a spin-off from parent Bristol-Myers Squibb Co. /quotes/comstock/13*!bmy/quotes/nls/bmy (BMY 26.75, +0.14, +0.53%) on Feb. 11 at $24 a share. The stock closed at $27.88 on Wednesday despite tough conditions in the stock market. See Mead Johnson story.
The Mead Johnson IPO sparked hopes that the long dormant initial offering market was coming back to life. But those hopes quickly sputtered out.
Despite plans by other firms to list shares, Mead Johnson's was the only U.S. IPO for the first quarter. See related story.
Analysts at IPO research firm Renaissance Capital said Changyou may lure investors who like its revenue growth and high margins.
"It remains to be seen whether investors will be turned off by its reliance on a single game, but with the deal being pitched at 6.5 times earnings, the price may be enticing enough to outweigh the risks," they said in a report.
Changyou.com reported net income of $108 million on revenue of $202 million in 2008, compared to net income of $5.3 million on revenue of $42 million in 2007.
Credit Suisse Group /quotes/comstock/13*!cs/quotes/nls/cs (CS 44.46, -0.40, -0.89%) and Bank of America Corp.'s /quotes/comstock/13*!bac/quotes/nls/bac (BAC 13.37, +0.16, +1.21%) Merrill Lynch unit served as underwriters for the Changyou.com IPO.
Laura Mandaro is a reporter for MarketWatch in San Francisco. MarketWatch staff writer Steve Gelsi contributed to this report.
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