San Diego-based HNC Software Inc. tapped into the dot-com stock frenzy Thursday, spinning off a subsidiary named Retek Inc. that specializes in business-to-business electronic commerce software.
Retek, based in Minneapolis, raised $82 million in an initial public offering. The offering's underwriters had expected that it would trade at $12 to $14 a share; it closed Thursday at $32.5625. With 45.5 million shares outstanding, Retek has market capitalization of $1.48 billion, a hair under HNC's market cap of $1.49 billion.
"Retek can get that kind of valuation, because in a lot of people's minds it is a dot-com company," said Richard Williams, an equity analyst at Jefferies & Co., New York. HNC "spun it off to capture its full value in the market," he said.
HNC, which sells predictive software that banks and credit card companies use for fraud detection, has retained 80% of Retek. It plans to give its Retek shares to its HNC shareholders as a tax-free dividend within nine months.
Ward Carey, vice president of HNC, said this spinoff and future ones are part of the company's commitment to create value for HNC shareholders.
"Retek has an enormous opportunity, and it will benefit in a huge way from the visibility of being a public company," he said.
HNC's stock was trading midday Friday at $62, up 25% for the week and 55% for November.
Using HNC's neural network technology, a form of artificial intelligence that can learn to recognize patterns in data, Retek's software lets retailers with more than $500 million in annual sales manage inventory and forecast cash flows, Mr. Carey said.
HNC also said last week it has invested $2 million in Keylime Software Inc., an upstart San Diego-based provider of software that lets banks and corporations monitor their Web sites.
"It tells you what people are clicking on and what people are reading, so you can start to understand where you are having an impact," Mr. Carey said.
The Keylime investment is one of several HNC has made in promising technology companies.
HNC invested $6 million this year in Open Solutions Inc., a provider of client/server core banking technology. It also invested $2 million in Qpass Inc., an Internet micropayment processor; $750,000 in Aim Solutions Inc., which sells software that automates on-line direct marketing campaigns; and an undisclosed amount in ShopNow.com Inc., a Web mall that hosts merchants.
Credit Suisse First Boston, Robertson Stephens, and U.S. Bancorp Piper Jaffray Inc. managed the Retek offering.