IPO Pipeline Is Still Chock Full o' Nets
By Gregg Wirth
Staff Reporter
6/22/99 4:11 PM ET
It's enough to make your headspin.com.
The rocky performance and uncertain reception of several Internet IPOs in the past few weeks hasn't stemmed the flood of new issue filings. IPO investors can expect a whole slew of dot-coms coming out soon, with prefixes such as garden, tunes, bamboo, mortgage and tickets. If it's all starting to look repetitive, then it should come as no surprise that there also is a deja.com awaiting its IPO. And as the Internet sector seems to be recovering from the drubbing it took over the past few weeks, new issuers are confident the spigot isn't going to be turned off any time soon.
"It's wild," says Barry Newman, head of technology banking at Banc of America Securities. "Every time the market has dipped like this [in past weeks], it has come back."
There have been 126 Internet companies filing to go public since March, and the pace is accelerating, according to Thomson Securities Data. About a quarter of those new filings were filed in the past four weeks alone. Ironically, it was about four weeks ago that the market for Internet IPOs experienced its first major sputter as two newly priced deals -- ZipLink (ZIPL:Nasdaq) and Juno Online (JWEB:) -- fell below their initial pricing on their first day of trading. It was the first time more than one Net IPO fell below its pricing on its first trading day, and it marked a stark change in how such offerings had been received since late last year.
Investors, glutted for months on a steady diet of two Net IPOs a day on average, also have changed. With supply soaring, they've become more picky about which deals they buy.
That new critical eye has led to a sharp divide -- long seen in non-Internet IPOs -- between the reception of new issues seen as quality operations and those seen as pretenders. This divide came into full force last week. Of the five new Internet IPOs that started trading Friday, two had healthy returns, two closed only slightly higher and one closed below its initial offering price.
The first-day doubling and tripling of initial prices, which became the norm earlier this year, may eventually be looked upon as a relic of a strange and unbridled time in IPO history. (Since late May, only one IPO, Phone.com (PHCM:Nasdaq), closed on a double -- more than twice its IPO price -- on its first day of trading.) Before dot-com companies started coming to the market en masse, IPOs were considered a rousing success if they saw a 30% upward spike on their first day of trading.
Still, the thought of merely respectable first-day pops hasn't deterred new debutantes. There are 24 IPOs slated for this week, most Internet-related. Next week, 17 new deals are on tap so far, including 11 Net offerings.
This week has already shown the discipline that picky investors are forcing on the market. First to test the waters was Salon.com (SALN:Nasdaq), the online politics and culture magazine. Salon, which has suffered through some bad press, priced Monday night at 10 1/2, the low end of its range, and opened Tuesday at 9 7/8. Another Net IPO, Ramp Networks (RAMP:Nasdaq), also priced Monday night -- at 11, the midpoint of its range -- and opened at 12 3/16. Ramp, based in Santa Clara, Calif., makes Internet access equipment for small businesses.
Two higher-profile Internet issues -- Juniper Networks and TD Waterhouse Securities -- are expected to draw a lot of investor attention later this week. Juniper is an Internet router manufacturer that is pricing 4.8 million shares at a range between 21 and 23 through Goldman Sachs. That deal is expected Thursday.
Similarly, TD Waterhouse, nation's third-largest online brokerage, is likely to benefit by its name recognition. Waterhouse is ambitiously pricing a whopping 32 million shares at a range between 20 and 24 via Credit Suisse First Boston. That deal could price as early as Tuesday night.
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