news of fox IPO:
IPO market roars back to life
EarthWeb rockets up; Fox and MONY Group do fine
By Darren Chervitz, CBS MarketWatch
Last Update: 11:35 AM ET Nov 11, 1998
NEW YORK (CBS.MW) -- The IPO market aroused from a deep slumber
Wednesday as three new companies took their first steps on Wall Street.
The most explosive debut came from the smallest deal of the day: Internet
publisher EarthWeb, which has created a number of Web sites targeted at
computer programmers and other information technology professionals.
Shares of EarthWeb (EWBX) opened for trading at 40, a 186 percent
premium to the $14 offering price. In trading of more than 3.5 million
shares, the stock rose to 53, up more than 279 percent. If it can hold onto
those gains, EarthWeb, with $1.9 million in sales and $5.3 million in losses for the first nine
months of 1998, would become the best first-day performer ever.
Meanwhile, the other two deals of the day were doing just fine in early trading. Fox
Entertainment (FOX) opened at 24 1/2, a 9 percent premium to the offering price and rose
slightly as more than 34 million shares changed hands. News Corp., which is selling the 18
percent stake to the public, rose 2 percent to 28 7/16.
And insurance provider MONY Group (MNY) rose 20 percent above its $23.50 offering
price. The stock opened at 29 1/2, and fell to 28 1/4 in trading of about 4.8 million shares.
It is the first time Wall Street has seen three new IPOs in one day since Aug. 18, when Crown
Castle (TWRS), Entrust Technologies (ENTU) and Terayon Communication Systems
(TRYN) debuted.
Analysts attributed the sudden revival in the world of IPOs to the
broader market's gradual and steady recovery, since hitting
bottom on Oct. 8. The news has been particularly good in the
small-cap sector, with the Nasdaq Composite and Russell 2000
indices gaining more than 25 percent in the month.
"It's going to be the best buying opportunity for IPO investors
that we've seen in years," said David Menlow, president of
Millburn, N.J.-based IPO Financial Network, a research service
that predicts opening premiums for stock offerings.
Menlow reasons that issuers, trying to ensure that demand is
there for their deals, will price them at a substantial discount to
peers.
Deal terms
Fox Entertainment upped the size of its IPO by nearly 40 million
shares and still priced the deal at $22.50, in the middle of the
expected $21 to $24 range. The film and TV unit of News Corp.
(NWS) sold 128.4 million shares, compared to the original 85
million shares listed in the company's earlier IPO filings. The
$2.8 billion deal from lead manager Merrill Lynch is the third largest for a U.S. company
ever, behind Lucent Technologies (LU) and Conoco (COC) (which raised a record $4.4
billion in an October offering). See earlier analysis
Insurance provider MONY Group, also known as The Mutual Life Insurance Company of
New York, also increased the size of its offering, to 12.9 million from 11.25 million. Lead
underwriter Goldman Sachs priced the IPO at $23.50, at the top end of a range that had
already been increased earlier this week.
Internet publisher EarthWeb, which has created a host of Web sites targeted at technical
professionals, priced its 2.1 million share offering at $14 each, at the high end of the expected
$12 to $14 range. J.P. Morgan is the lead manager on the deal, while online broker Wit
Capital is the "e-manager" handling Internet distribution.
At a recent trading price of 53, the company has a market value of more than $418.7 million,
not including outstanding options.
As the first Internet IPO since eBay (EBAY) went public, the importance of the deal should
not be overlooked, said Kathleen Smith, portfolio manager at Renaissance Capital's IPO Fund
(IPOSX).
Unlike Fox Entertainment and MONY, which have established track records, a recognized
brand name and profits, EarthWeb is more typical of deals in the IPO pipeline, she said. Only
two weeks ago, deals from Computer Literacy, Theglobe.com and Healtheon had to be pulled
at the last minute.
A successful offering for EarthWeb could mean that several deals that have been waiting in the
wings for a while may get another shot at life. See related story
IPO reincarnations
"We think the market is open for good companies," said Naveen Jain, chief executive of
Infospace.com, which filed for an IPO in late August. "(An EarthWeb IPO) is a good sign,
but with or without it, we are ready to go."
On Tuesday, E-Tek Dynamics, a company that's had its debut plans delayed a couple of
times, came back onto the scene with an amended IPO filing. The fiber optics company now
plans on selling 4 million shares at $8 to $10, down from an initial 6 million share offering at
$9 to $11, according to the SEC document. Importantly, pre-IPO investors in E-Tek no longer
plan on selling any shares in the deal, according to the filing. See related commentary.
Yet IPO Financial's Menlow said Tuesday that EarthWeb would not be "the turning point" for
the new-issue market.
"EarthWeb is a singular situation riding the wave of the current Internet frenzy," he said.
Indeed, the company likely benefited from the strong performance of recent Internet new
issues, such as eBay, the person-to-person online auction service, and software developer
Inktomi (INKT).
The top-five IPOs in the class of 1998 are all Internet stocks, Smith pointed out. eBay, up
more than 625 percent from its offering price, has a slight lead over Inktomi in the race for the
No. 1 spot.
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