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When AT&T Wireless offered its first Initial Public Offering in early 2000, it outdid the previous largest IPO by UPS (United Parcel Services). While the company offered about 360 million shares priced between $26 and $32 per share, it managed to raise a capital of $10.6 billion with each share being sold at $29.50, slightly above the mid-point of the price range. This was approximately twice the capital raised by the UPS, which managed to raise $5.52 billion by going public. However, not everything was smooth with the largest among the high profile US IPOs.

When the offering was made public in April 2000, AT&T Wireless encountered hesitant market behavior thanks to the reports indicating an increase in inflation. This data, along with the reports of a rise in labor costs by the Labor Department, made it a less than perfect day for the IPO. The telecom industry was on the verge of several ambitious acquisitions and mergers such as those between the Bell Atlantic and Vodafone AirTouch, SBC Communications and BellSouth and the acquisition of Sprint PCS by MCI WorldCom.

There were speculations about why AT&T had decided to go public instead of following the trend of mergers and acquisitions. However, in the light of the company's performance in the recent past, the IPO managed to generate substantial interest among the market players. Since 1998, the subscriber base had grown from 8 million to more than 12 million users. Moreover, in the previous year, the company had managed a surge of over 40 per cent in its revenues ending with $7.6 billion at the end.

The IPO offered approximately 16 per cent of the company's shares with AT&T Corporation retaining a controlling stake of over 2.31 million shares. Market analysts were all praises for the accurate pricing of the shares which appeased everyone from institutional investors to individual investors alike. Considering the prevalent market conditions and the large number of shares being offered, the company hit the bull's eye by pricing the shares towards the lower end of the range. Thus, despite speculations about the tracking stock which offered equity in AT&T instead of the wireless unit, the IPO proved to be a success. Several other companies who had withheld or called off their plans to go public benefited from the positive response received by the AT&T tracking stock.

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By John Halasz
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