Posted by: Olga Kharif on October 11, 2007
Virgin Mobile just priced its IPO at the lower end of the range. The stock, expected to trade under ticker “VM,” priced at $15 vs. the original price range of $15 to $17 a share. Interestingly, though, the shares have rallied a bit in their first day of trading, to $15.75.
The market move — even this moderate rally — has caught me by surprise. After all, so many other mobile virtual network operators (MVNOs), renting their networks from service providers, have recently gone under: Disney Mobile, Amp’d Mobile, to name a few. Virgin is also feeling the heat from other prepaid, and fast-growing operators, like Leap and Metro PCS. Worse, after years in business, Virgin is still in the red.
So, why the rally? Some people theorize that investors believe that, with Amp’d and some of its ilk out of the way, Virgin may have an easier time acquiring customers.
But here’s my theory: Investors see potential in Virgin’s experiments with a new business model, which involves subsidizing service through ads. My colleague, Catherine Holahan, has written about Virgin’s Sugar Mama; you can read about the pilot here.