EarthWeb IPO seen as proxy for small-cap hopefuls
By Daniel Bases
NEW YORK, Nov 10 (Reuters) - The fate of small-cap companies hoping to tap the equities markets for capital could rest on the fortunes of EarthWeb Inc., an Internet-based resource for information technology professionals, analysts said.
EarthWeb, (www.earthweb.com) founded in 1994, wants to sell 2.1 million shares for between $12 and $14 each, through lead underwriter J.P. Morgan, and raise as much as $33.8 million, including an over allotment of 315,000 shares. Pricing is scheduled for Tuesday after the market close.
The New York-based Internet start-up comes to the marketplace looking for capital at a time when some other Internet companies have withdrawn their offerings, finding the market volatility too risky. It is currently funded by Warburg Pincus Ventures LP.
''They're going to be be testing the waters, and if they can price in the range, it would be a good sign for the small-cap hi-tech sector,'' said Paul Bard, analyst with Renaissance Capital.
Analysts expect EarthWeb's stock to trade flat, or just slightly above, its initial offering price if it trades on Wednesday morning.
''The company has a negative earnings outlook looking at its prospectus. They had $974,000 in revenues and a net loss of $2.9 million in the six months ended June 30,'' said Ben Holmes, president of Boulder, Colorado-based ipoPros, IPO consulting company.
IPO analysts noted a significant decline in IPO's since the late summer stock market selloff.
However, the rally in prices, especially in Internet companies such as online auctioneer eBay Inc. (Nasdaq:EBAY - news), and search engine software makers such as Yahoo! Inc. (Nasdaq:YHOO - news), are raising hopes that winds are stirring and EarthWeb will be swept along, pulling the IPO market out of its doldrums.
''Given market conditions, EarthWeb looks good. We've had the wind at our backs since'' the market lows in October, said John Fitzgibbon, editor of the IPO Reporter.
In the last two and half weeks, Silicon Alley start-ups InterWorld Corp., NetGrocer Inc., and theglobe.com, have withdrawn their public offerings.
All three cited market conditions for delaying their plans. NetGrocer decided to find funding through private investments.
Silicon Alley, originally referred to as the Flatiron District of Manhattan, where Internet-based companies sprang up, has taken on a wider reference, to mean all of New York City and its surrounding areas.
The market for Internet IPOs is becoming more selective, analyst say. Two to three years ago, they note, investors were willing to pay seemingly any price for stock in companies that did not have earnings and didn't expect any soon.
''The market went into a deep freeze in late July. For the Internet companies that came to the market with no earnings and losses, well the market has turned their back on them,'' said Holmes.
''eBay and (large energy company) Conoco Inc. (NYSE:COC - news), they came to the market with positive earnings stories and they have set the tone,'' he added.
''The little guy IPO's are drying up now,'' said Josh Harris, president and chief executive officer of Pseudo Programs Inc. ''If you're not up and running with a site now, you're chances for making in the public market are diminishing.''
Shares of EarthWeb are expected to trade under the symbol (Nasdaq:EWBX - news) on the Nasdaq National Market. |
