By LYNN COWAN of Dow Jones
The IPO of medical-device maker AGA Medical Holdings Inc. barely kept its head above water in early trading Wednesday after cutting the price of its deal and increasing the number of shares sold by its founder.

The company’s stock opened at $14.50 on the Nasdaq, flat with its initial-public-offering price. A total of 13.75 million shares were sold at a price below its expected $15 to $16 range; that range was lowered from $19 to $21 earlier this week. In early trading, the stock struggled to stay above its IPO level, trading recently at $14.50.

Of the total shares in the deal, 7.24 million were sold by director and co-founder Franck L. Gougeon — two million more than originally planned — so those proceeds won’t benefit the company.

Mr. Gougeon’s selling stake repeats a pattern seen in RailAmerica Inc.’s IPO last week, when private equity fund Fortress Investment Group LLC sold more shares after the deal priced below expectations, increasing the total deal size by one million shares. RailAmerica’s stock flopped 8% on its first day and is still below its IPO price.

In Gougeon’s case, the IPO’s total size wasn’t increased; he just downsized the portion of the shares being sold by the company and upped his, reducing the proceeds that AGA Medical receives in order to increase the amount he could sell.

The company’s largest single shareholder, private-equity fund Welsh Carson Anderson & Stowe, didn’t sell in the IPO.

AGA Medical plans to use the majority of its proceeds to pay down debt. Based in Plymouth, Minn., AGA Medical makes devices that close structural heart defects and abnormal blood vessels. It sells the devices in 112 countries and derives 61% of its net sales internationally. It currently has a pipeline of heart and blood-vessel treatments in various stages of clinical trials.

Net sales have been steadily rising over the years, but profits have been uneven. In the first half of 2009, net sales rose 17% to $94 million, while the firm reported a net loss of $4 million compared to net income of $2 million in the same period a year earlier. Higher expenses from expanding its sales staff in Europe, ongoing corporate back-office infrastructure investments, and litigation and patent defense costs dragged on its profits.

AGA Medical’s offering was jointly managed by Bank of America Corp.’s Bank of America Merrill Lynch division, Citigroup Inc., Deutsche Bank AG, Leerink Swann LLC and Wells Fargo & Co.

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