Stick a fork in the IPO market
-- it's done
By Gracian Mack
Redherring.com
December 28, 1999
The once-crowded initial public offering neighborhood
has become somewhat of a ghost town for the last two
weeks of 1999, as Wall Street appears to have
shuttered the doors against any new offerings until after
the New Year's holiday.
Just last week syndicate officials
were promising a heady 15 deals,
worth an aggregate $1.85 billion,
for the close of 1999. But by the
middle of the week, that number
had been pared down to two, and
now it's down to one.
The most recent pushback is the
proposed 2.5 million share IPO
of Atlas Pipeline Partners, a subsidiary of Resource
America (Nasdaq: REXI). Under the direction of
Friedman Billings Ramsey (NYSE: FBR), the lead
underwriting manager, Atlas will wait until sometime in
January to take the public-market plunge.
That wait might turn out to be a
good idea, because finding
investors willing to pony up
between $14 and $18 per share
for a low-tech gas pipeline outfit
might have proved as difficult a
task as locating the company's
Moon Township, Pennsylvania,
headquarters on a gas-station
map.
ANOTHER LINUX HOPEFUL
The other deal, a proposed IPO of LinuxOne
(proposed Nasdaq symbol: LINX), hopes to be the
next wagon to be hitched to the Linux juggernauts Red
Hat (Nasdaq: RHAT), Andover.net (Nasdaq:
ANDN), Cobalt Networks (Nasdaq: COBT), and
VA Linux (Nasdaq: LNUX). LinuxOne sells a version
of the Linux operating system, as well as other
Linux-related software tools.
The now-famous Red Hat was priced at $14 on
August 12. With a recent close of $234 per share, the
stock is up 1,574 percent and sports a market
capitalization of just over $16 billion. Cobalt Networks
was priced on November 11 at $22 per share. With a
recent close of $109 per share, the stock is up 395
percent and sports a market capitalization of almost $3
billion. Andover.net was priced on December 9 at $18
per share. With a recent close of $45 per share, the
stock is up 152 percent and sports a market
capitalization of $361 million. And VA Linux was
priced on December 10 at $30 per share. With a
recent close of $190.50 per share, the stock is up 535
percent and sports a market capitalization of $7.6
billion.
That's stiff competition for market share, and that
doesn't count other Linux-related firms such as
TurboLinux, Linuxcare.com, SuSe, Caldera Systems,
and Linux Mandrake, which even LinuxOne officials
admit have more clout in the alternative-to-Windows
universe, as well as more of an operating history.
Based in Mountain View, California, LinuxOne intends
to sell 3 million shares of common stock at $8.25 per
share. Originally planned as a do-it-yourself offer,
LinuxOne's Chairman and CEO, Wun Chiou, recently
brought in Capital West Securities to handle the
details.
That may help, but it won't change the fact that the
company's first commercial product rolled off of the
shelves almost at the same time the company filed for
the offering in September. So far, LinuxOne has $157
million in losses on no revenue.
BETTING ON THE CEO
LinuxOne has announced that since the filing date in
September, it landed three overseas contracts for its
operating system. But with no perceivable funding, the
fate of the company rests with Mr. Chiou, who among
other things was chief of the artificial intelligence
branch of the NASA Ames Research Center for a
year in 1984. After the offering Mr. Chiou will have
reduced his equity stake in the company to about 40
percent, down from a little more than 60 percent.
The syndicate desk at Capital West says that they are
trying to get the deal done before the end of the year.
If that doesn't happen, LinuxOne will have to refile
with the U.S. Securities and Exchange Commission; by
the time approval is given several other highly
anticipated January offerings will be in progress.
Among those are Altavista (proposed Nasdaq symbol:
ALTA), Palm Computing, and Buy.com (proposed
Nasdaq symbol: BUYC).
Last year the IPO market didn't return from holiday
break until January 14 with the issue of Marketwatch
(Nasdaq: MKTW). For LinuxOne, the plan is to get
into the market before 1999 closes its doors for good.
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