DreamWorks Animation Shares Jump After Successful IPO

Shares of DreamWorks Animation SKG Inc. (DWA) jumped in their market debut Thursday after the animated film maker's initial public offering raised a higher-than-expected $812 million.

The shares were at $37.98 in midday trading, up 35 percent from their IPO price of $28, after touching a high of $39.50 on the New York Stock Exchange (search). DreamWorks Animation had estimated its shares would price in a range of $23 to $25.

The deal marks the first IPO by a major movie studio in seven years and comes as the producer of computer animated films rides high on the box office success of its "Shark Tale (search)," which follows the summer smash hit "Shrek 2."

The IPO separates the animation group from the live-action unit of DreamWorks, which was formed a decade ago by moguls Steven Spielberg (search), David Geffen (search) and Jeffrey Katzenberg (search).

It also gives Paul Allen (search), a co-founder of Microsoft Corp. (MSFT) and an original investor in DreamWorks, a chance to cash out on his investment.

"We really think this is the next big chapter in our story," Katzenberg said in an interview, referring to the decision to pursue a public offering. "We think it's a good opportunity not only to reward Paul Allen, but to invite other investors in now."

At its IPO price, DreamWorks Animation had a market capitalization of roughly $3 billion, compared about $4.55 billion for close rival Pixar Animation Studios Inc.

In the first six months of this year, when "Shrek 2 (search)" was released, DreamWorks Animation reported net income of $120.7 million, but it lost $187 million in 2003.

Pixar reported earnings of $64.1 million for the first six months of this year, and for the fiscal year ended Jan. 3 it earned $124.8 million.

According to regulatory filings, DreamWorks Animation sold 25 million shares in its IPO, while stockholders sold 4 million shares. The company will use cash from the IPO to pay off debt and fund production.

The lead underwriters of the IPO were led by Goldman Sachs and JPMorgan.