NZRO Longs:
Just posting this as a reminder from IPO.com. What do you think NZRO's stock price might do when the quite period is up and Goldman Sachs, H&Q, DLJ, and Wit Capital all recommend it? Suffice to say, I will be buying the stock every day for the next two weeks. I have a pretty good feeling I may not be the only one. ENJOY!
Will Free Internet Service Providers Dent AOL?
Friday, September 24, 1999
By Jeffrey R. Hirschkorn
IPO.com
Operating in a highly competitive industry, Internet service providers continue to jockey for market share. One company receiving a lot of fan fare for its free Internet services is NetZero, a Westlake Village, Calif.-based firm that priced at $16, above amended price talk of $14 to $16. Early indicators from the S-1 saw talk at $9 to $ 11 a share. The underwriting comprised of Goldman, Sachs, Donaldson Lufkin & Jenrette, Hambrecht & Quist and e-syndicate pioneer Wit Capital.
“A lot of companies are in the pipeline to complete deals by the end of the year,” said one new issue analyst at press time. “The IPO market is back into full swing. People are paying close attention to the Web-based and networking companies coming out.”
Pioneering a new concept by a U.S. Internet service provider, NetZero is following a similar pattern that FreeServe encountered earlier this year. A unit of Dixons Group in the United Kingdom, FREE (the company's Nasdaq ADS listing ticker) offered 15.3 million shares – ten shares equal one overseas share of FreeServe – at $23.70 a share in late July through Credit Suisse First Boston.
However, proving that any type of threat to America Online the Steve Case-led firm would seize the moment by stepping onto someone else's territory to snatch away market share. Currently charging $21.95 for both AOL and CompuServe Internet access programs, a recent chuckle by Case noted that if they didn't give people more bang for their buck, the company would lose money.
At this point, FreeServe is ascertaining a sizeable piece of the overseas free Internet service market. In an effort to thwart FreeServe, earlier in the year, America Online announced plans to offer services in the United Kingdom through its Netscape Communications subsidiary.
“NetZero should enjoy a healthy pop,” said Randall Roth, senior analyst at Renaissance Capital Management, home of The IPO Plus Aftermarket Fund. “Maybe not what was seen earlier in the year but certainly a nice jump.”
Pioneering a new Internet service that provides clients with free and easy access to the ‘Net while offering online advertisers an effective way to target the users. By the way, NZRO (the company's Nasdaq trading ticker) offers services in over 1,600 cities nationwide.
Increasing its presence, the company's latest red herring (industry jargon for a preliminary prospectus) reports that since the site's launch in October 1998 through August 1999, nearly 1.68 million users have registered for NetZero's services. Moreover, during August, nearly 891,000 users received over 830 million advertising impressions.
Despite all the glory, analysts are concerned about NetZero's future potential. With skyrocketing costs and questions pertaining to financial health, one analyst is extremely worried that the company will never earn a dime.
Attracting big name venture capitalists, one of the firm's most vital holders includes CPQ Holdings, the investment powerhouse funded by Compaq Computer. Through dilution, CPQ will retain 7.9% of NetZero.
“This is still an early stage company that emerged from start up in the second quarter,” concluded one market maven. “It is an unproven model.”
Finally, initial shareholders stand to make a killing when NetZero prices considering that they paid $0.52 cents for one share of the West Coast-based Internet service provider.
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Jeffrey R. Hirschkorn is an IPO Analyst for IPO.com IPO Training
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