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Thanks Mo--here's a WSJ article on "infrastructure" IPOs...
Dow Jones Newswires -- June 23, 1999
DJ Infrastructure Rules The Internet IPO Market
By Dunstan Prial
NEW YORK (Dow Jones)--Internet infrastructure companies have taken firm command of
first place in the initial public offering market.
Ariba Inc. (ARBA), a Sunnyvale, Calif., provider intranet- and Internet-based
business-to-business electronic commerce systems, hit a tremendous home run
Wednesday, leaving no doubt as to investors' current preference when it comes to new
issues.
Ariba's shares, which sold late Tuesday at the initial offering price of $23, opened
Wednesday at 61. Strong aftermarket demand has pushed the stock as high as 87, a
278% gain from the IPO price. The stock traded recently at 84 on heavy Nasdaq Stock
Market volume of 10.3 million shares.
Earlier Wednesday, shares of GlobeSpan Semiconductor Inc. (GSPN), which makes
chips used in technology for high-speed Internet access, made nearly as successful a
debut.
Investors have apparently come to the conclusion that the companies that make the nuts
and bolts of the Internet are more likely to be successful than their more high-profile Web
counterparts that either provide content sell items online, said Robert Mescal, an IPO
analyst with the Institute for Econometric Research, Deerfield Beach, Fla.
"People realize that the parts makers are going to make money regardless of which
direction the Web goes," Mescal said.
Online content providers and retailers are "in violent competition" with each other,
Mescal added, and investors are wary of the glut.
IPO investors now seem to be taking a more long-term approach to the new issues they
buy. "You no longer have the truly anxious buyer who wants to get in an out and make a
few hundred bucks," Mescal said.
The change of heart has meant a boon for Internet infrastructure companies. Indeed,
eight of this year's top ten IPO performers fall under the realm of infrastructure.
Ariba makes a system that helps companies automate the procurement of goods and
services they buy from other companies. In addition, the company runs an e-commerce
Web site where companies can conduct transactions.
The IPO represented a 12% stake in the company. With 42.7 million shares outstanding,
Ariba generated a $3.5 billion market capitalization through the sale.
Morgan Stanley Dean Witter served as lead underwriter.
Pre-pricing demand by institutional investors forecasted Wednesday's strong opening
day performance, which was reminiscent of spectacular debuts earlier this year from
content provider MarketWatch.com Inc. (MKTW) and toy retailer eToys Inc. (ETYS).
Yet both MarketWatch and eToys have fallen dramatically from their early run-ups.
Meanwhile, Internet infrastructure companies such as Redback Networks Inc. (RBAK)
and Brocade Communications Systems Inc. (BRCD) have held on to their gains.
Redback debuted last month at $23 and traded recently at 101, a 339% gain. Brocade's
IPO shares sold for $19 and traded recently at 82, up 331%. |
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