PLEASANTON -- Blackhawk Network Holdings, the company that provides the gift cards you pick up on a whim at the checkout aisle, is giving its own gift to parent company Safeway: a $230 million IPO and rising stock price on Wall Street.
The Pleasanton-based Safeway spinoff announced Thursday evening that it would sell 10 million shares in an initial public offering at $23 a share, $2 more per share than it expected in its previous filing with the Securities and Exchange Commission earlier this month.
When the stock debuted Friday morning on Nasdaq under the ticker symbol HAWK, shares immediately jumped to $25, a gain of 8.7 percent; prices moved as high as $26.94, a gain of 17.1 percent from the IPO price, before closing at $26.01, a 13.1 percent increase.
Safeway is unloading almost all the shares offered in the IPO, slightly more than 9.8 million of the 10 million, and therefore banking the lion's share of the proceeds. The grocery retailer, also based in Pleasanton, will continue to be the majority owner of the business it founded in 2001, with its ownership dropping slightly from 95.4 percent to 93.8 percent.
Blackhawk provides a prepaid payment network that uses its in-house technology to offer a broad range of gift cards, other prepaid products and payment services in the United States and 18 other countries. Its specialty is selling gift, phone, sports, ticket, prepaid debit and prepaid wireless phone cards through a network of more than 100,000 retailers around the world, with parent company Safeway the most prominent for many Californians.
Gas stations operated by San Ramon-based Chevron also sell Blackhawk gift cards, which involve 300 brands of cards from companies such as Barnes & Noble, iTunes, Starbucks, Visa and the NBA. The cards can also be found in other convenience, drug, grocery and specialty stores, as well as online or at Gift Card Mall racks, which display hundreds of cards that can be redeemed online or on-site at retail locations.
The business has proved lucrative: For all of 2012, Blackhawk earned $48.2 million on operating revenue of $959.1 million. Compared with 2011, profit jumped 31.9 percent and sales climbed 27.6 percent, according to documents Blackhawk filed with the SEC.
Despite the rapid robust sales and profit growth, Blackhawk warned that its success must overcome some significant hazards. One of the chief uncertainties is the ever-shifting strength of the network of distribution partners Blackhawk uses.
"Our operating revenues may decline if we lose one or more of our top distribution partners, fail to maintain existing relationships with our distribution partners or fail to attract new distribution partners to our network," Blackhawk warned in the SEC filing. "If the financial performance of our distribution partners' businesses declines," Blackhawk also could suffer, the company said.
It makes sense that Blackhawk is doing well, said Patricia Edwards, chief investment officer with Washington state-based Trutina Financial.
"Gift cards have embedded themselves into our lives, they are part of our lives now," Edwards said. "Years ago, people were not that excited about gift cards. Now they're cool."
With Blackhawk showing signs of success, the East Bay company could face more competition.
"This is a model that will be used more and more by retailers," said Michael Yoshikami, chief executive and founder of Walnut Creek-based Destination Wealth Management. "It is very profitable for retailers."