Deals May Strain On Refco News;

Qimonda raises less than expected in IPO

Tue Aug 8, 2006 10:45pm ET170

NEW YORK, Aug 8 (Reuters) - German memory chip maker Qimonda AG (QI.N: Quote, Profile, Research) raised $546 million in an initial public offering on Tuesday, a sum below expectation as investors passed on an IPO initially billed as one of the largest in the U.S. this year, according to an underwriter.

The IPO's poor reception was bad news for parent company Infineon (IFXGn.DE: Quote, Profile, Research) and represents the latest in a series of high profile flotations to come up short.

Shares of Infineon fell as much as 3.2 percent earlier Tuesday on market talk that only half of Qimonda's order book had been placed with investors.

The Qimonda offering was later reduced to 42 million American Depository Shares from 63 million and sold for $13 per share against a $16 to $18 forecast.

The overallotment option was also reduced to 6.3 million ADS from 9.45 million.

The IPO is only the latest flotation to disappoint.

Difficult market conditions prompted by concerns about inflation and interest-rate increases among other factors, caused two companies to withdraw or postpone scheduled IPOs in the first week of August, 10 companies in July, and 39 companies on the year, according to data tracker Dealogic.

Of the 15 companies that made it to market in July, five priced below range, it said.

However, general market conditions were only partial reasons for the lackluster IPO, said Francis Gaskins, an independent IPO analyst and president of IPO Desktop.

Both the company's gross profit and trends in the memory chip market worked against Qimonda, he said.

"They are on the wrong side of the curve in terms of market growth," Gaskins said. "Given what is happening in the market, they are probably lucky to get it done."

Infineon, which will remain a majority shareholder in Qimonda, wants to exit the memory chip business because of the unpredictable nature of its profits and the high capital investments required.

Qimonda intends to use proceeds from the offering to invest in manufacturing facilities and research and development.

Credit Suisse, JPMorgan and Citigroup were the lead underwriters for the Qimonda IPO.

The company has applied to list their shares on the New York Stock Exchange under the symbol "QI."