Pension funds were unable to satisfy their appetite for United Parcel Service of America Inc. stock on the day of its IPO.
The $23 billion Tennessee Consolidated Retirement System, Nashville, bought 45,000 shares of UPS, less than 10% of the 600,000 shares it requested.
The $95 billion Florida State Board of Administration, Tallahassee, bought 5,000 shares, a fraction of the 150,000 shares it requested.
Investors estimated the average allotment ranged between 1% and 33% of what had been requested, because the offer was so oversubscribed.
Mike Keeler, director of equities at Tennessee, said his fund bought most of its shares directly from Morgan Stanley Dean Witter, New York, underwriter of the IPO. But Tennessee also bought shares through other investment bankers in the deal. "We were originally interested because it was going to be so cheap, in the low 40s, I think. But it's a great, well-run company that should have extra growth because there has been a secular shift. More people are buying things off the Internet and getting them delivered instead of carrying bags and boxes themselves."
Ken Menke, assistant chief of domestic equities at the Florida State Board, said he had been following UPS for a long time hoping it would go public. "It's a wonderful, well-managed company that competes effectively with the Post Office. I expect it to increase its volume considerably because of the Internet."
If the price of the stock falls, Mr. Menke said, he hopes to add to the position.
Jim Glickenhaus, general partner at Glickenhaus & Co., New York, said it's typical in hot initial public offerings for even the biggest investors not to get all they want of the stock.
"When IPOs are as hot as this one was, no one ever gets as much as they want," he observed.
The Atlanta-based, 97-year-old parcel delivery giant raised $5.47 billion, selling 10% of the company to the public, or 109.4 million shares at $50 apiece.
Mr. Glickenhaus wouldn't say how many shares his firm bought. But he did say he flipped his stake within seconds of buying.
"We bought it at $50 and sold it seconds later at $68" a share. That gave Glickenhaus a tidy 36% profit on its purchase.
"The people who got in on the deal are the people who give the underwriter a lot of business," Mr. Glickenhaus said. "We give Morgan Stanley a lot business, so we got in."
He added he sold because the stock became overvalued too quickly. "But we may buy it again later as a long-term holding when the price comes back to reality."
There was so much demand for UPS on its first day of trading, the stock zoomed to 68 soon after it opened on the New York Stock Exchange, climbing to a high of 705/16. The next day it rose another 65/8 to close at 747/8. It was trading in the mid-70s on Friday.
Several money managers who bought at the offering price of $50 soon began debating at what price they would sell or buy more.
Richard Crable, equity analyst at Loomis Sayles & Co. LP, Boston, said, "We aren't adding to it now at this price ($70)." Still, he is bullish on the company, noting: "Everyone knows who United Parcel is, because of their brown trucks and brown uniforms. It resonates with people."
Steve Colbert, senior analyst at Jurika & Voyles LP, Oakland, Calif., concurred.
"UPS is a unique franchise," he said. "It's similar to a Coca-Cola or Gillette and is just as strong globally, so it deserves a premium."
Another attraction, he added, is that it's an Internet play, while its closest competitor, Memphis, Tenn.-based FDX, is not. UPS delivered 55% of all purchases made over the Internet last year, and it's expected to increase that market share substantially this year, Mr. Colbert said.