American Well Corp., a Boston supplier of telehealth technology, jumped 28 percent on its first day of trading Thursday, as investors continued to snap up shares of freshly minted public companies.
It was a long wait — almost 3½ hours after the New York Stock Exchange began regular trading — until the first buyers and sellers agreed to an opening price of $25.51. That was up from $18, the price set in its initial public offering Wednesday night.
The company, also known as Amwell, ended the trading day at $23.07, giving it a market value of $5.2 billion.
“Amwell is riding a tidal wave in the IPO market,” said Matthew Kennedy, a senior strategist at Renaissance Capital, a manager of IPO-focused exchange-traded funds. “Amwell specifically had a COVID-19 angle, with increased appetite for anything in the telehealth space.”
The company raised $742 million Wednesday with the sale of 41.2 million class A shares. That marked an increase over initial plans to sell 35 million shares at $14 to $16 apiece. The company brought in an additional $100 million through the sale of stock to Google, the Internet search unit of Alphabet Inc., at the IPO price.
The IPO culminated a 14-year journey from startup to public company for cofounders Ido Schoenberg, Amwell’s chairman and co-chief executive, and Roy Schoenberg, president and co-CEO. The brothers control 51 percent of the voting power of the company through class B shares, and each of their stakes works out to $380 million based on Thursday’s close.
Former Massachusetts governor Deval Patrick and Dr. Peter Slavin, president of Massachusetts General Hospital, are directors of the company, and each held options on 352,000 class A shares as of Dec. 31, according to the company’s IPO filing. That number of shares was worth more than $8.1 million after the first day of trading.
Prior to starting Amwell in 2006, Ido Schoenberg and his wife, Phyllis Gotlib, launched a company that made software for hospital critical-care units. Five years later he joined CareKey, the health care software company Roy Schoenberg had founded. CareKey was acquired in 2005.
Amwell, whose products allow health care providers to connect remotely with their patients, priced its IPO on the same day that shares of Snowflake Inc., a California company that helps companies manage data in the cloud, more than doubled on the first day of trading. Snowflake’s shares gave back 10 percent on Thursday.
Among the 101 companies that began trading in the United States in the past three months, the average first-day gain was 15 percent, according to Bloomberg data. The average increase from each company’s start of trading through Wednesday was 26 percent. There were 62 IPOs in the same period last year.
The coronavirus pandemic has driven a dramatic increase in the use of telehealth by doctors, mental health professionals, and other caregivers. Amwell said in its IPO prospectus that visits nearly tripled to 2.2 million in the second quarter from the previous three months as restrictions on remote care were eased, but also said “it is uncertain how long the relaxed policies will remain in effect, and there can be no guarantee that once the COVID-19 pandemic is over that such restrictions will not be reinstated or changed in a way that adversely affects our business.”
Telehealth visits in the Northeast declined by about one-third from their peak in April, according to data presented to the Massachusetts Health Policy Commission on Tuesday, and accounted for roughly 10 percent of visits by the end of July.
At the IPO price of $18 a share, Amwell’s stock was valued at 14 to 18 times sales, according to Bloomberg Intelligence analysts Jonathan Palmer and Fallon Stephan. Its larger competitor, Teladoc Health Inc., is trading at 13 times sales.
“We don’t believe a premium multiple is justified given Teladoc’s profitability and scale advantages,” the Bloomberg Intelligence analysts wrote in a report Thursday.
Amwell’s customers include hospital systems, health insurance plans, and state and federal government agencies. Its revenue was $122.3 million for the six months ended June 30, an increase of 77 percent over the same period a year earlier. Amwell’s net loss widened to $113.4 million from $41.6 million.
The company has given its underwriters the option to acquire 6.2 million additional shares of class A common stock, including 1.7 million class A shares from existing shareholders. The IPO underwriters include Morgan Stanley, Goldman Sachs, and Piper Sandler.