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The company's shares rose 44 cents, or about 6 percent, to $8.44 by the close of regular trading. The lackluster performance was no surprise to analysts and fund managers; tepid demand caused the company to postpone the share sale last week and to lower the offering price to $8, about half the price that was initially expected.
"All in all, I think it performed pretty much as expected," said Steven Tuen, a portfolio manager with the Kinetics Internet Fund, who opted not to buy any shares. "I don't think anyone expected a moon shot out of this offering."
Last week, AOL Latin America slashed the price range of its shares from between $15 and $17 to between $8 and $10. Yesterday the company sold 25 million shares at $8, the bottom of the lowered range, raising $200 million.
AOL Latin America faces intense competition in the region, especially from a growing number of Internet service providers offering free access. Latin American residents, many of whom are poor, already face expensive and spotty telephone service.
Some established players in the region have expanded their businesses beyond Internet access, suggesting the need for other revenue sources. For example, Terra Networks, which has extensive operations in the region, recently acquired Web portal Lycos.
"You can't ignore the fact that Terra made an acquisition; they felt the need to do something else," said Kathleen Heaney, an analyst with Bluestone Capital Internet.
Analysts and investors say one of AOL Latin America's greatest challenges is signing up paying subscribers despite the growing popularity of free Internet services. In addition, advertising revenues could be tight considering that a relatively small number of Latin American companies advertise online.
Currently, 60 percent to 70 percent of all online advertisers in Brazil are other dot-coms, according to a report by Goldman Sachs analysts Chris Hussey and Maria Gonzales.
"Critical to the long-term development of viable media-based Internet models in the region, in our opinion, is the presence of offline companies advertising online," the report said.
AOL Latin America trades on the Nasdaq Stock Market under the ticker symbol "AOLA." Salomon Smith Barney was the lead manager for the sale.
