IPO market as hot as it gets: Appetite for e-commerce
Sizzling debut sets the stage for launch of 724 Solutions
By STEPHEN MILES
The Financial Post, with files from news services
A stunning debut by business-to-business e-commerce
company Neoforma.com Inc. yesterday confirmed that the
initial public offering party still rages in 2000.
Neoforma.com -- the first IPO greater than $10-million (all
figures in U.S. dollars) since Dec. 16 -- was looked upon as a
litmus test for the new issue market.
Battery maker Talisman Enterprises Inc. priced a
$4.5-million offering last week but it attracted little attention.
Santa Clara, Calif.-based Neoforma.com, which markets
medical equipment, products and supplies to health-care
providers on the Internet, sold seven million shares at $13
each, or a 12% stake, through lead underwriter Merrill Lynch
& Co.
The stock (NEOF-O) roared on to the Nasdaq Stock
Market at $39 7/8 and hit an intraday high of $60 15/16
before closing up $39 3/8 at $52 3/8.
The performance suggested that investors' enthusiasm for
online firms is just as strong as last year, when Internet IPOs
rose an average of 90% on their first day of trading and the
business-to-business sector ruled.
Each of the top 25 IPOs in the United States in 1999 was
either a technology or Internet company.
Bellwether b2b firm Internet Capital Group (ICGE-O) was
the best performing new issue last year with a gain of 2,733%.
Other b2b plays such as Commerce One Inc. (CMRC-O) ,
up 2707%, and VerticalNet Inc. (VERT/NASDAQ), up
1950%, helped propel the Nasdaq composite index to a gain
of 85.5%, easily beating all the major indexes for the best
return on the Street.
Analysts said the hunger for b2b firms augurs well for this
week's highly anticipated public launch of Canadian software
firm 724 Solutions Inc.
Toronto-based 724 Solutions lets banks offer online financial
services over mobile phones, personal digital assistants and
other wireless devices. The majority of its financial institution
client base has a share of the firm, including Bank of America,
which will hold a 9% post-offering stake, Citigroup (18.1%)
and Finland-based telecom firm Sonera (18.1%).
724 Solutions plans to sell six million shares at between $11
and $13 each through a syndicate of underwriters. But the
stock, which will trade on Nasdaq under the ticker SVNX
and in Toronto under SVN, could be priced as high as $18
and may double in value on its first day of trading, analysts
said.
"We love the stock," said David Menlow, head of Millburn,
N.J.-based IPOfinancial.com. "Citibank and friends are in the
house. What a blockbuster group of investors this company
has."
724 Solutions has yet to make any money. It booked about
$2.1-million in revenue in the nine months ended Sept. 30 and
posted a net loss of about $6.2-million.
But industry watchers say the b2b sector is one of the most
attractive markets. Forrester Research, an Internet consulting
firm, predicts that the b2b market will hit $1.3-trillion by
2003, up from $109-billion today.
"We expect b2b electronic commerce to grow rapidly as
businesses continue to adopt and implement electronic
commerce approaches," said Mary Meeker, Internet stock
analyst at Morgan Stanley Dean Witter in a recent report on
the sector.
"We also expect b2b e-commerce to become significantly
larger than business-to-consumer e-commerce."
With the new issue market turning in its best performance in
1999, many firms are rushing to capitalize on the high
valuations and hot demand.
Among 1999's biggest IPO successes were Linux-related
firms Red Hat Inc., Cobalt Networks, Andover.Net and VA
Linux Systems Inc.
San Francisco-based Linuxcare Inc., which provides
24-hour technical support to companies using the Linux
computer operating system, yesterday filed with the U.S.
Securities & Exchange Commission for a $92-million stock
offering. Demand is expected to be overwhelming as pricing
draws nearer, analysts said.
Caldera Systems Inc., another Linux-related firm, is also
doing a $57.5-million IPO.
Canadian firms in the IPO pipeline include Toronto-based
Extend Media Inc., an interactive media company that is
selling 6.6 million shares from treasury and 1.9 million of
shareholders' stock. Delta, B.C.-based ATI Airtest
Technologies Inc., which manufactures gas detection
equipment, also is offering two million shares at $1 each.
canoe.ca |
