Well so much for a big name backer (and hype in front of the sale....didn't help much.
Wake me up when the techs reach a point of interest to value buyers. Might be awhile given the indigestion over in Asia from high oil prices and their fragile situation.
My FCX seems to be drawing strength off a minor bump in gold......very defensive
mad2
March 10, 2001
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Loudcloud Raises Eyebrows
With Pre-IPO News Release
By PETER EDMONSTON
WSJ.COM
Loudcloud Inc. just couldn't keep quiet.
Just hours before the Internet-infrastructure company's initial public offering was priced early Thursday evening, Loudcloud put out an upbeat news release announcing a Web-hosting contract with media giant News Corp.
The move disregarded the so-called "quiet period" that has widely discouraged companies from making statement around the time of their IPOs. Encouraged by underwriters, the tradition helps minimize the risk that companies will run afoul of securities rules aimed at protecting investors.
Off to Market:
Loudcloud President and CEO Ben Horowitz says he is pleased with his company's offering and explains how he believes Loudcloud will succeed in the current economic climate.
The Loudcloud-News Corp. deal wasn't a secret; it had been public knowledge since mid-February. But the timing of the news release was curious, coming on the same day the IPO was priced at $6 a share, less than the anticipated range of $8 to $10.
The bellwether IPO was generally disappointing. On a day when the Dow Jones Industrial Average fell nearly 214 points and the Nasdaq Composite Index sank nearly 116 points, Loudcloud shares started trading three cents above their IPO and settled up 16 cents, or 3%, at $6.16. But that was after the company and its underwriters twice lowered the expected value of its stock offering, dashing hopes that Loudcloud would reignite a moribund market for new issues.
Regarding the quiet period, there aren't any formal restrictions. But the Securities and Exchange Commission has frowned upon pre-IPO publicity, even prompting companies to delay their offerings. In one notable case, the SEC's concerns about advance publicity led Web incubator Divine interVentures, now known as Divine Inc., to delay its IPO last summer.
Loudcloud IPO Is Priced at $6, Down From Earlier Estimates
Andreessen's Presence in IPO Might Not Help Loudcloud (March 7)
As is the agency's policy, SEC spokesman John Heine declined to comment on the timing of Loudcloud's release. And Loudcloud spokesman Mike Moeller also declined to comment on the matter, citing "quiet-period" rules.
Nevertheless, a delay for the Loudcloud deal was moot. The company's shares started trading Friday on the Nasdaq Stock Market.
Loudcloud's press release, which included a ringing endorsement of the company from a top News Corp. executive, raised eyebrows among some securities lawyers. "It's a very unusual event," said Alan Dye, a partner with Hogan & Hartson, a law firm in Washington, D.C. "I'm sure it made their lawyers nervous."
Distributed at 3:03 EST p.m. on Thursday by the news-delivery service Business Wire, Loudcloud's press release announced that News Corp. had hired the company to handle its Internet operations, which include the popular Web sites FoxSports.com, FoxNews.com and Fox.com. The press release quoted Loudcloud chairman and co-founder Marc Andreessen, who calls News Corp.'s portfolio of Internet properties "among the most dynamic on the Internet."
Lachlan Murdoch, News Corp.'s deputy chief operating officer, praised Loudcloud in the release, saying "Loudcloud's technical expertise and software automation technology made it a clear choice as our operations partner."
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Traditionally, a company that is about to go public will refrain from talking to the press or making announcements for fear of violating securities laws. At the heart of the matter is a federal rule that states that a company cannot offer to sell new securities except through a prospectus, which is required to disclose a whole array of information both positive and negative about the company.
Underwriters encourage companies to observe this so-called "quiet period" surrounding the sale of new stock. The informal practice, a conservative interpretation of SEC rules, is aimed at preventing the companies from disclosing information that might not be included in their prospectus or from appearing to hype the deal.
But the practice of staying mum has eroded in recent years, as an increasing number of publicity-hungry Internet companies have filled their quiet periods with news releases and TV appearances.
The SEC often tolerates the chattiness as part of a company's normal course of business -- but not always. Last July, for example, Divine postponed its IPO amid unease from the SEC about pre-offering publicity. And in October 1999, a popular Internet grocery service called Webvan Group delayed its stock offering because of SEC concerns about interviews that Webvan executives gave to magazines and a private pitch that the company gave to institutional investors.
But securities lawyers are quick to point out the quiet period is not a gag order and that there are many cases in which a company waiting to go public can issue press releases. Ronald Brody, a partner at Chicago-based law firm Mayer, Brown & Platt, said this is particularly true if such press releases are consistent with the company's previous business practices and if any material news from those releases is already disclosed in the company's prospectus.
Indeed, the Loudcloud-News Corp. deal was already public. On February 13, the British newspaper the Guardian wrote a story about the deal, calling it Loudcloud's "first global contract" since it was founded in 1999. And in a Feb. 16 amendment to its prospectus, Loudcloud added News Corp. to its list of customers.
The SEC's Mr. Heine said that "the quiet period is much more a matter of practice rather than regulation. There's no rule on the books that says, 'Don't talk to the press for six months before you go public.'"
Even so, Harvey Pitt, a former SEC general counsel now in private practice, said there are rules of thumb when it comes to making announcements during a quiet period. "You don't want people to be diverted from all of the company's information in the prospectus -- which includes risk factors and the like -- to one piece of current, positive news," said Mr. Pitt.
Wall Street has kept close tabs on Loudcloud's stock offering, hoping it might indicate a rebound in the battered market for Internet IPOs. Mr. Andreessen, the company's co-founder, gained a reputation as a new-economy wunderkind for helping to found Netscape Communications Inc. in the early 1990s.
But despite Andreessen's cachet, Loudcloud struggled to sell investors on its mission of becoming a soup-to-nuts supplier of third-party Internet services.
Marc Baum, chief executive officer of IPO.com, says he was surprised by Loudcloud's decision to issue the release. "I'd think you'd be very careful not to make statements" so close to your market debut, he said. "You don't want to do anything to mess it up."
Write to Peter Edmonston at peter.edmonston@wsj.com
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