Showing that Wall Street's love affair with the Internet goes on, shares of Security First Network Bank skyrocketed following its initial public offering.
Last Thursday, the Internet-based bank's share price opened at $20 and jumped to $45 within an hour on volume of nearly 3.2 million shares. As of Friday afternoon, the stock was in the low 40s.
Last October, Security First, which had been a unit of Cardinal Bancshares, Lexington, Ky., began offering traditional banking services over the Internet. Almost 2,000 bank customers are using the Internet to do their banking.
Security First became a publicly traded company last week following its spinoff from Cardinal. The new institution raised $48.8 million with the IPO. Huntington Bancshares, Wachovia Corp., Area Bancshares, and Synovus Financial Corp. are Security First investors, according to Security First's prospectus.
David Pearl, a portfolio manager at Citicorp, attributed Security First's meteoric rise to "speculation that Internet banking will one day take off." However, he did question the market's rationale.
"Someone is valuing it as a new type of business," when many Internet and direct home banking services already exist, Mr. Pearl said.
James R. Kleeblatt, managing director at Friedman, Billings Ramsey & Co., an Arlington, Va.-based investment banking firm, was more supportive of investors who joined the buying spree.
" I think these are some of the most sophisticated investors in the United States and Europe."
Meanwhile, Cardinal Bancshares saw its own stock jump 18% Thursday to a high of $105.50, even though the thrift no longer has any ownership in Security First.
There were other examples in the markets that underscored investors' enthusiasm for anything related to the Internet.
Open Markets Inc., Cambridge, Mass., also experienced an initial public offering similar to Security First's. The firm, which builds Internet-based authentication software for businesses, saw its shares jump $21.875 to $39.875 on its first day of trading.
In other news affecting financial services, Cybercash Inc., closed trading Friday afternoon at around $60, up $11 from last week's close of $49. In fact, Cybercash's stock has risen nearly 53% in just two weeks on heavy trading on Nasdaq.
Elsewhere, Verifone Inc., a Redwood City, Calif.-based payment processor, announced a deal with Royal Bank of Canada to develop an end-to- end Internet-based electronic commerce solution.
The system would use software from Verifone and Netscape Communications Corp., and may be the first actual use of the Secure Electronic Transaction protocol, which took Mastercard International and Visa International nearly six months to hammer out. Verifone was trading at $51.75 Friday afternoon, up $4.125 for the week.