This article mentions three Internet IPO's. Leaves a certain one out.
GeoCities prices at $17
Despite concerns, Net pioneer set to soar on debut
By Darren Chervitz, CBS MarketWatch
Last Update: 7:01 PM ET Aug 10, 1998
NEW YORK (CBS.MW) -- Internet pioneer GeoCities priced its 4.75 million share initial
public offering at a higher-than-expected $17 and could give the stuggling IPO market a
much-needed shot of adrenalin when the stock opens for trading Tuesday.
Santa Monica, Calif.-based GeoCities (GCTY) and lead
underwriter Goldman Sachs had already boosted the offering's
expected price range to $14 to $16 a share, up from the original
$12 to $14 range listed in the company's earlier IPO filings.
At $17, the company will have a market value of about $521
million, excluding outstanding options and the 712,500 shares
Goldman Sachs and the other underwriters can purchase to
cover any over-allotments.
Expected to soar
Most analysts expect GeoCities shares to soar when they open for trading. However, some
caution against comparing it to the record-setting performance of Broadcast.com (BCST), the
Internet video and audio aggregator that saw its shares jump nearly 250 percent on its market
debut last month.
"It's a more uncertain market that what it was when
Broadcast.com went public, specifically for Internet stocks." said
Ken Fleming, analyst at Greenwich, Conn.-based Renaissance
Capital. "But this is a top Internet company. So if you're a
believer in the Internet, this is one stock that's going to be around
a while."
CitySearch, 24/7 Media
A well-received GeoCities IPO is likely to be a positive sign for
the several other Internet companies waiting to go public this
week, including CitySearch and 24/7 Media.
The GeoCities could also be a boost for the rest of the lackluster
IPO market, which has been in the doldrums for several months. Last week, for instance,
only six companies managed to price their deals, raising a meager $256.5 million in gross
proceeds. But Mark Basham, a Standard & Poor's new issue analyst, said excitement over
GeoCities and the other scheduled Internet deals could revive investor attention in the new
issue market.
"If enough people are willing to buy into Internet mania, and I anticipate a lot of that will be
funneled into GeoCities, then it could last," he said.
Traffic top 10
GeoCities is the only one of the top 10 most heavily-trafficked Web sites that isn't part of a
public company. To date, the company has had trouble squeezing significant revenue out of
its 1.9 million members, who create personal home pages within theme "neighborhoods" on
GeoCities.
For the first quarter of the year, the company generated revenue of $2.2 million, or about
$1.15 per subscriber. Nearly all of that comes from advertising. America Online (AOL), by
contrast, generated about $58 per subscriber in revenue for the first quarter, while The Wall
Street Journal sold $623 worth of ads per subscriber last year.
Even though the site's thematically-organized neighborhoods offer advertisers the ability to
target consumers, some advertisers could be cautious about marketing their products on
GeoCities since the editorial content is produced by the members and subjected to minimal
censorship and quality control.
Competitors gaining
According to Francis Gaskins, editor of Gaskins IPO Desktop, GeoCities' primary
competitors, such as Lycos' (LCOS) Tripod, Xoom and Theglobe.com, have been gaining on
GeoCities in terms of traffic, as measured by Media Metrix. "That's not a leadership role that
deserves a big stock market premium," he said.
Theglobe.com, which has filed for its own IPO, said in its prospectus that 6.1 million unique
visitors came to its site in June, about 40 percent of what GeoCities reported.
Analysts also worry that GeoCities' potential member base may be limited since the process of
building and maintaining a Web site requires significant time. "There is some concern that
people might lose interest in their site and let it go," said Fleming.
GeoCities counts CMG Information Services (CMGI) as its largest shareholder. CMG is also
a major investor in Lycos, which recently bought GeoCities competitor Tripod. Softbank, an
investor in Ziff-Davis (ZD), Yahoo! (YHOO) and E-Trade (EGRP), also owns a 35 percent
stake of the company |
