Many Eager Investors Miss
Engage IPO Opportunity
By TERZAH EWING
Staff Reporter of THE WALL STREET JOURNAL
NEW YORK -- It was an offer too good to pass up.
But some investors eager to get shares in the initial public stock offering of Engage Technologies
through a special deal set up for them by Engage's parent, CMGI, found the offer passed them up
instead.
CMGI, which specializes in managing Internet companies and often takes them public, offered
some of its own shareholders the chance to get shares in Engage, an Internet-marketing company,
at the offering price through CMGI's first "directed share" program.
To get in line for Engage shares, the CMGI investors had to register
their interest and open an account with broker Wit Capital (if they
didn't already have one) which would distribute the new shares.
Problems arose the night the Securities and Exchange Commission declared the deal effective.
When that occurred at around 7 p.m. EDT on Monday, Wit Capital scrambled to notify investors
via e-mail that they had until 2 a.m. to reconfirm their interest.
But many new account-holders, unaware of the need to monitor e-mail for notices in the evening
and late into the night, failed to get in on the deal, even though Wit extended the deadline to 4 a.m.
One New York accountant said he arrived at work the next morning to find both the notification
and a later note informing him he hadn't been allocated shares because he hadn't reconfirmed.
CMGI officials said they fielded similar calls from disappointed investors after the deal priced and
Engage shares rose as high as 47 in Nasdaq Stock Market trading Tuesday from an offering price
of $15. Thursday, the shares fell $2.125 to $33.75.
"I did receive some calls in regards to the timing" of the notice, said Andrew Hajducky, CMGI's
chief financial officer. "But I also explained to each shareholder that it was clearly disclosed at the
time of application and in our Q & A section that we have no control over when SEC declares us
to be effective. We put all the wheels in motion as soon as we could."
CMGI now has an 82% stake in Engage. Both firms are based in Andover, Mass.
Susan Berkowitz, senior vice president of marketing at Wit, said "It is unfortunate for the
population of people who left work or only have e-mail at work to not be able to do [the deal]."
But, she adds, the timetable that was used reflects notification requirements of the Federal
Communications Commission.
Wit officials noted that in a "no action" letter issued last week, the SEC said it wouldn't object if
Wit started contacting customers as much as two days before an expected IPO pricing, allowing
them more time to reach those who wanted stock. But, said Mark Loehr, director of investment
banking at Wit, the Engage deal wasn't covered by the letter. |
