I can't see how anyone can justify a price of 8.00 , with revenue of $454,000.....A bit of advice From Briefing.com...."(DAYTRADER) The other day my dentist asked me: "How do I get in on one of those low-priced IPOs?" Honestly, my first thought was that this guy better familiarize himself with the term class-action lawsuit. What many investors fail to grasp is that for every Amazon.com (AMZN) eBay (EBAY) there is a Pilot Network Services (PILT) or Interplay Entertainment (IPLY). In a Story Stock last week, Briefing advised investors to steer clear of Internet IPOs until the quality of deals begins to improve. The feeling that underwriters are rushing peaky deals to market is only intensified by the Q3 earnings report of interactive entertainment software maker, Interplay Entertainment. Not only did IPLY report a Q3 loss of $0.83 when a profit of $0.05 was expected, but the company warned that it is experiencing cash and liquidity pressure. Furthermore, due to the delayed release of two titles, Earthworm Jim 3 and Messiah, Q4 results are expected to fall "significantly below" the First Call mean estimate of $0.20 a share. Did we mention that Interplay Entertainment came to market just four months ago. With an initial price of $5.50 a share, IPLY would have fallen right into the category of stock my dentist was looking to unearth. The magnitude of this blow-up is so unbelievable that we must repeat the details: The company came to market four months ago, selling 5 million shares at $5.50 each, and 1) misses its qtr by 88 cents; 2) warns that the next qtr will post "significantly below" expectations; and 3) announces that it is strapped for cash. Maybe investors should have become suspicious when one of the company's directors resigned only a few months after the IPO. But by that time the stock had already fallen 42% below its IPO price. In reaction to the dire comments, Bear Stearns (which was co-manager of the IPO) and Warburg Dillon Read have downgraded the stock from "buy" to "neutral." We haven't heard anything out of lead underwriter Piper Jaffray. For those of you who still believe that the "low-priced" IPO is the route to fortune, see the table below for some of the gems you could have purchased this year. We have only listed deals that were offered below $10, though there are plenty more that priced at higher levels whose performance has been just as dismal. And to those who retort that these performances should be blamed on market conditions, 3-of-4 names listed have issued earnings warnings in their short time as publicly traded companies.
Stock IPO Date Offering Price Current Price Post-IPO
Performance
Echelon Corp (ELON) 7/27/98 $7 $2.44 -65%
SOFTWORKS (SWRX) 8/3/98 $7 $4.50 -36%
Interplay Entertainment (IPLY) 6/19/98 $5.50 $1.50 -73%
Pilot Network Services (PILT) 8/11/98 $14 $6.00 -57% "
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