Carl Yankowski is going to need more than one palm to wrap around his newly fat wallet.
The CEO of Palm Inc. became an instant billionaire yesterday when the initial public offering price of his company almost tripled, attracting a valuation of $53.3 billion at the closing bell.
That makes Yankowski’s 2 percent stake worth $1.07 billion, which vests 25 percent per year for the next four years..
He and other executives at Palm, which makes the popular Palm Pilot and other handheld computer devices, watched with glee as their stock shot up from its IPO price of $38 to close at $95.06.
Until yesterday, Palm was a subsidiary of 3Com Corp., which decided to spin it off to unlock its value. It worked — Palm is now valued at almost twice 3Com’s market capitalization of $28 billion,
But 3Com still owns 94.8 percent of the outstanding shares of Palm and intends to spin them off to 3Com shareholders within six months. Many of Palm’s officers and directors will have a chance to participate in the spin-off but only on the same terms as other 3Com shareholders, according to a filing with the Securities and Exchange Commission.
The stock of 3Com fell $22.31 to $81.81. So far this year, despite yesterday’s downturn, 3Com gained 74.07 percent.
Three other big corporations managed to nab big pieces of Palm before yesterday’s IPO.
America Online and Nokia now have stakes worth $200 million, while Motorola’s equity position is valued at $163 million.
Earlier in the day, Palm shareholders had even bigger gains. The IPO had a delayed opening with the first trade priced at $145, up 281 percent from the IPO price. The stock then moved as high as $165 before paring those gains.
Most retail investors complained that they couldn’t get in at all, because so few shares were made available in the IPO. Indeed, the lead underwriter for the deal, Goldman Sachs, arranged to sell only 4.1 percent of the outstanding equity to the public.
That’s the second-smallest percentage made available in the IPO ever for a U.S. company, according to CommScan LLC, which tracks the IPO market.
“There are so many people out there shut out of this offering,” said David Menlow, president of IPOfinancial.com.
Indeed, those who did get in on the IPO were institutional shareholders, including aggressive technology-oriented mutual funds. The USAA Aggressive Growth fund nabbed 15,000 Palm shares, according to Eric Efron, co-portfolio manager.
“People want to do their computing from anywhere, anytime, and these handheld devices fill that need,” he said.
Palm has sold more than 5.5 million Palm Pilot or other handheld computing devices since they were introduced four years ago. While some of them are simply electronic organizers, the high-end $449 Palm VII provides wireless access to the Internet through Palm’s own server.
In its offering document, Palm disclosed that Internet access is a strong priority for the firm as it develops the next generation of Palm products. Palm said developers have already created several thousand programs to run on Palm devices.