AOL-LA IPO now expected to price on
Thursday
Reuters Company News - August 03, 2000 09:19
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NEW YORK, Aug 3 (Reuters) - The initial public offering of America Online
Latin America Inc., a joint venture between America Online Inc. and the
Venezuelan media giant Cisneros Group, is expected to price after the stock
market close on Thursday, one of the deal's underwriters said.
The pricing had been expected earlier this week.
On Tuesday the expected price range on the IPO was cut to $8 to $10 a share
from $15 to $17. The 25 million-share offering is now expected to raise up to
$250 million, compared with previous expectations of $425 million.
The deal faced lukewarm investor interest at the higher price range amid
scepticism over Fort Lauderdale, Fla.-based AOL-LA's prospects in the
region. The depressed state of the IPO market, especially for
business-to-consumer deals, did not help.
The IPO underwriters include Salomon Smith Barney and Donaldson Lufkin
Jenrette, which disclosed the planned Thursday pricing.
AOL has faced criticism from analysts who have said the powerhouse Internet
access provider has been slow to build its brand overseas, especially in Latin
America, where local players, often backed by media and telecommunications
giants, have become entrenched.
Among AOL-LA's rivals are Universo Online SA, which leads the pack in
Brazil, the region's largest and most developed Internet market; Terra
Networks SA and Telefonos de Mexico .
AOL-LA had about 129,000 subscribers in Brazil as of June 25.
"They certainly arrived late. But on the other hand, the market in Brazil is a
small fraction of what it's going to be in a few years," said Jupiter
Communications analyst Lucas Graves. Of the 67 million users in the region
expected online by 2005, only 16 million will be online at the end of 2000, he
said.
AOL-LA started service in Brazil last year and in Mexico last month. It is
expected to launch its Argentine service this month. It had a net loss of $51.2
million on revenues of $5.2 million for the nine months ended March 31.
The company's decision to stick to its pay service despite the prevalence of
free Internet access in the Latin American market has sparked criticism. While
the verdict may still be out on whether free access is viable, analysts believe it is
a force AOL will have to reckon with because it depresses prices in the
market.
AOL executives have argued that once new users get a taste of its service, they
will prefer it because of its ease of use.
To build its brand, AOL Mexico formed several marketing partnerships earlier
this week with Wal-Mart Mexico, Blockbuster Inc. , Sony and Tower
Records. |
