IPO momentum building on OpenTable

22 05 2009

Despite a broader market skid yesterday, OpenTable entered the public markets with a very respectable IPO that’s giving hope to the dozens of venture-backed companies hankering for an exit.  Good coverage by the San Francisco Chronicle points out that this is no flood-gate event, but it certainly wasn’t a failure.  Watch to see if OpenTable holds onto its 60% gains from yesterday; it closed at $31.89 and trades on the Nasdaq under symbol OPEN. The company will likely face difficulties growing revenue since it appeals largely to mid- and up-scale restaurants and diners – a market that is prone to heavy recession pullbacks.  (UPDATE 5/26: On a day when the tech markets were bullish, OPEN has stabilized and shed its value down to $26.80 or so.  While this is still a 30%+ return for IPO investors at $20, it’s a substantial decline off the opening day hype.)

Image from VentureBeat

The impetus for innovation at OpenTable has never been larger now; their revenue potential in servicing restaurant reservations is not the making of a billion dollar company.  As the company develops trusted relationships with restaurants however, look for OpenTable to extend online and mobile marketing services for its clients.  If management sees its core capabilities in the online reservation space, look for it to expand to golf courses, boutique hotels and villas, and private events to consolidate market share in those niches as well.

If other pre-IPO companies (and their VC investors) like what they see, there could be a sizable increase in IPO registrations as companies compete with new secondary offerings for investment dollars still sitting on the sidelines.

OpenTable IPO lifts hopes on stock exchange – San Francisco Chronicle

OpenTable IPO rises 59%; Critics sneer – Wall Street Journal