) entered the market on June 18 at $14 a share, then rose to $23.38 and finally closed the day at $20.01. With 5.5 million offered shares, representing 21.5% of the company, Blackboard raked in $77 million. IPO analyst Tom Taulli liked what he saw: "This IPO seemed to excite investors, and they seemed to go ahead and jump on the bandwagon," he says.
Since the IPO, the stock has retreated a bit but is trading around $18 as of July 19. Now the question is: How much growth Blackboard can produce in coming months and years?
DOT-COM SURVIVOR. Blackboard isn't the only company offering education systems and services software. Its main competitors are: WebCT, eCollege.com (ECLG
), Desire2Learn, SunGard Data Systems (SDS
), Diebold (DBD
), and CBORD Group. And many of these competitors extend their offerings beyond educational services, making them attractive suppliers to customers with multiple needs.
Yet Blackboard's co-founders are young and are focused on building a company that can react with rapidly to what customers want. Jim Kabbani, former director of worldwide sales at Blackboard, says "There is constant improvement of product." Kabbani says when he worked at the company, which was created in a rowhouse in Washington, D.C., it was part of the fast-moving dot-com culture. He notes that unlike other startups at the time, it remained nimble enough to survive the depths of the bust.
Research firm Gartner estimates worldwide spending on hardware, internal services, information-technology services, and software in the education industry was $34 billion in 2003. And the market is rapidly growing. Starting from a base of zero, the seven-year-old Blackboard has over 2,000 customers in more than 50 countries and is hoping to maintain that rate of growth.
JUNIOR MARKET. When Matthew Pittinsky, 32, and Michael Chasen, 31, started Blackboard in 1997, they were still in their 20s. But not everyone sees their youth as a plus. "If I were CEO, I would surround myself with gray-haired public company men and women.... You need a management team that has a lot of depth," Taulli says.
Still, Taulli agrees Blackboard is a strong competitor right now and a hot IPO. And he believes that if it continues on its current growth trajectory, Blackboard could be acquired by one of its bigger competitors at some point.
Meanwhile, Blackboard plans to expand beyond universities into the K-12 market as a means of boosting revenue. But Richard Peterson, a market strategist for Thomson Financial in New York, points out that it may be a difficult sector to tap. "You have to look at building relationships with public schools vs. private," he says. "There may not be a lot of funding there. But if [Blackboard appeals to] local school boards and they have a willingness to fund it, they'll find [the money]." (Blackboard officials were unavailable for comment because the mandatory quiet period after its IPO doesn't end until Aug. 1.)
Still, Peterson believes Blackboard can remain a successful IPO if it continues to meet growth expectations. "It's about growing the business and trying to remain focused," he says. For investors, IPOs have had a shaky run the past few years, and Blackboard is off to a good start. Still, the risks are clear. Lynn is a reporter for BusinessWeek Online in the magazine's Washington bureau