And the news on Digital River keeps on keeping on:
<<<<Sizzlefest:
Internet IPOs Soar & Here Comes More
By Steve Harmon
Senior Investment Analyst
Internet.com
"Where Wall Street Meets The Web"
Anecdotal evidence that Wall Street may be starting to understand that the Internet is a major turning point in the evolution of
entire industries: last three Internet stock IPOs we ran through the abacus showed 238% average gain as a group. ISDEX,
Internet Stock Index, is up more than 70% year to date. That may bode well for three Internet public offerings hurling down the
water slide that now looks like a fixture on Wall Street through summer to year's end.
We don't need to go into Broadcast.com's record-setting IPO which soared 279% its first day out the chute. The amazing thing
in our book is that Broadcast.com has no real brand recognition. And still a week after going public BCST shares retained
most of its run, up 236% from the $18 per share initial public offering price. Of course no retail investor got a piece of that
"wholesale-like" price.
Three Amigos: Recent Internet IPOs
Internet stock
IPO price
Price July 20
% Change
Broadcast.com
$ 18.00
$ 60.50
236%
Inktomi
$ 18.00
$ 69.69
287%
NetGravity
$ 9.00
$ 22.06
145%
TOTAL/WEIGHTED AVERAGE
$ 45.00
$ 152.25
238%
Software search engine provider to Yahoo and Microsoft, as well as network caching software maker, Inktomi
(NASDAQ:INKT - news) climbed more than 287% from IPO to July 20.
Netgravity (NASDAQ:NETG - news) came out and stumbled before investors started believing it could be a contender for
DoubleClick (NASDAQ:DCLK - news) , even though NetGravity provides ad software. DoubleClick is an ad network,
slightly different animal.
With such strong after-market burners we think the summer and fall could continue to churn out Internet offerings at record
levels. The difference between now and 1994 when we first eyed Internet stocks is now they are front and center, message
boards provide people a easy way to share thoughts, information distribution is wider, and several home runs have been hit in
the 'Net IPO ballpark to drive interest.
On tap in order of best known to least known: GeoCities, Cyberian Outpost and Digital River.
While GeoCities cautiously hasn't revealed shares offered, target price or pro forma much of anything, we expect it to be
over-subscribed to the level of hysteria. If Broadcast.com went ballistic on market madness then GeoCities, a category creator
and leader, could break BCST's record for percent gains.
We think GeoCities could price the works at $575 million market cap with 5 million to 6 million shares offered at north of $25
per share and end its first day north of $1.5 billion to $2 billion.
Cyberian priced 4 million shares at $14 and Digital River, which has a network of software stores on numerous Web sites,
priced 3.2 million shares at $11.
ISDEX IPO
SPOTLIGHT
Cyberian
Outpost
Digital
River
GeoCities
Proposed ticker
COOL
DRIV
GCTY
Does what?
software/hardware
etailer
software
etailer
websteader
Shares offered
4.00
3.2
?
Greenshoe
0.60
0.48
?
Target share price
$ 14.00
$ 11.00
?
Gross proceeds
$ 58.40
$ 40.48
$ 72.45
Shares
outstanding
22.02
16.91
?
IPO market cap
$ 308.24
$ 186.05
?
Options/warrants
4.18
3.14
?
Fully-diluted
shares (FDS)
26.80
20.53
?
FDS market cap
$ 375.21
$ 225.83
?
Working capital
$ 62.43
$ 39.89
?
Long-term debt
$ -
FDS enterprise
value
$ 312.78
$ 185.94
?
Latest full-year
revenue
$ 22.70
$ 2.47
$4.58
Latest quarter
revenue
$ 11.56
$ 3.48
$2.17
Est. calendar (CY)
1998 revenue
$ 33.33
$ 14.25
$ 15.00
Latest quarter
(losses)
($4.63)
($3.97)
($2.90)
FDS
enterprise/latest
year rev.
13.8
75.2
?
FDS
enterprise/CY1998
9.4
13.0
?
Peer revenue
multiple/CY1998
4.1
17.9
26.4
Employees
(full-time)
87
76
114
Enterprise
value/employee
$ 3.60
$ 2.45
Latest quarter
revenue/employee
$ 0.13
$ 0.05
$ 0.02
Lead underwriter
BT ALEX.
BROWN
BT ALEX.
BROWN
GOLDMAN
SACHS
all figures in millions except share price, multiples (c) 1998 Mecklermedia, Internet.com. Click here for more Internet stock reports
Our analysis puts Cyberian at 9.4x estimated calendar year 1998 revenue vs. rival Egghead.com's (NASDAQ:EGGS - news)
4.1x. Digital River, meanwhile, looks like it may be at a discount on revenue multiple basis vs. Software.net
(NASDAQ:SWNT - news) , which we forecast could be at 17.9x revenue to Digital River's 13x.
Both Egghead and Software.net have $500 million market caps or 60% to 160% more than the IPO market caps of Cyberian
or Digital River, respectively.
With the IPO market on white hot pitch, though, we expect Cyberian, Digital River and GeoCities to bump the price and
shares just before they go. While GeoCities revenue forecast for this year looks thin, we think 1999 and 2000 revenue may be
the ones to start the flow.
With its 15 million users GeoCities market cap could exceed Lycos-Tripod (NASDAQ:LCOS - news) , or more than $1
billion its first day, perhaps even $2 billion. Enjoying a top-10 slot in Relevant Knowledge's monthly surveys helps GeoCities in
its value hunt. Consider that if its users were held at $100 each (the average for the top-10 is $121 or $104 without Yahoo)
that implies about a $1.5 billion value for GeoCities. To get more info on any of these IPOs contact the underwriters for each
offering shown in the table.
One thing's for sure so far this summer, the heat is on and the IPO slide looks very wet. >>>> |
