Shares of 3D technology company RealD gained more than 30 percent from the companyâ€™s initial public offering pricing yesterday, even as analysts debated the long-term challenges ahead of both the company and the stereoscopic medium in theaters.
BusinessWeek reports that of the 12.5 million total shares offered, 6.5 million came from private-equity funds and other owners. The high number of owner sales was enough to give Chapwood Capital analyst Ed Butowsky pause.
â€śIâ€™m surprised theyâ€™re going public when they are,â€ť Butowsky told Bloomberg. â€śHalf of the shares are being sold by existing shareholders â€“ that bothers me.â€ťÂ Butowsky added that the company was losing money; indeed, RealD reported a net loss of $51 million for its fiscal year ended March 26, 2010 (via RTTNews).
Meanwhile, BTIG Research (which has a Sell rating on the RealD stock) points out that the company â€” presuming it sticks to its current business model of licensing projectors to movie theaters â€” â€śrequires continued strength in 3D attendanceâ€ť if it is to succeed over the long term.
BTIGâ€™s current estimates for the company assume that 3D attendance as a percentage of overall US movie attendance will increase from 15% in 2010 to 35% in 2014. However, the research firm says, â€śwe have a hard time believing that more than 1 out of every three attendees of a movie in a few years will be for a 3D film and worry that 35% of attendance could still be too high.â€ť