Tech Stocks
Web Firm EarthWeb's Shares
Triple in First Day of Trading
EarthWeb IPO Shows Great Timing,
But Internet Content Sector Is Crowded
By NICK WINGFIELD
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- EarthWeb's sensational stock-market debut, which saw
the Web publisher's shares more than triple above their offering price, not
only marked the resuscitation of the high-tech initial public offering, it
revived a breed of deal that had been sent to the virtual embalmer -- the
Internet content IPO.
Late Tuesday, EarthWeb priced 2.1 million shares at $14 apiece in a deal that
was aggressively promoted by lead underwriter J.P. Morgan Securities Inc.
After opening at 40 Wednesday, New York-based EarthWeb's stock shot as
high as 59. It closed at 48 11/16 on Nasdaq Stock Market volume of 11.5
million shares.
The runup left EarthWeb, which has 7.9 million
outstanding shares, with a market value of about
$380 million.
Meanwhile, the Nasdaq Composite Index slipped
3.39 to 1862.23 and Morgan Stanley's high-tech
35 index added 1.88 to 683.46.
EarthWeb's timing couldn't have been better.
The IPO market has been comatose for months
due to jitters about global economic conditions,
though a few big deals, such as oil company
Conoco, and one spectacular Internet IPO,
online auctioneer eBay, managed to get through.
In recent weeks, however, traditional technology
and Internet stocks have roared back to life. On
Tuesday, for example, shares of Amazon.com,
Yahoo! and America Online hit all-time highs
intraday. eBay soared $30 a share Tuesday
before easing slightly,
EarthWeb "hit the market at the exact right
moment," said Patrick Keane, an analyst at
Jupiter Communications. "EarthWeb found a
very nice opening in the window to get through.
This is partially great timing."
EarthWeb's IPO is a rare bird. The company
publishes technical Web sites for a highly
specialized audience, information-technology
professionals. One of its more prominent sites,
Developer.com, offer tips on arcane subjects like
JavaScript programming, as well as
bulletin-board discussions discussion boards and
other Web "community" perks. The site is
almost entirely supported by advertising revenue, though other money-making
prospects include subscriptions and shopping transactions.
That puts EarthWeb in rather crowded quarters with other ad-supported
publishers, including CNET, Ziff-Davis, Mecklermedia, CMP Media and
Wired Digital, which is being acquired by navigation service Lycos. Of those
competitors, though, CNET is the only "pure-play" Internet content company
that has gone public.
For the six months ended June 30 1998, EarthWeb had a net loss of $2.9
million on revenues of $974,000, compared with a net loss of $2.8 million on
revenues of $592,000. Like other Net firms, the company expects to incur net
losses for the foreseeable future.
In fact, IPOs for Internet content companies of any stripe, technical or
otherwise, have been few and far between. Analysts believe that partly reflects
Wall Street's greater passion for electronic-commerce players like highflier
Amazon or general-interest "portal" sites such as Yahoo, which also sell
advertising. Sports publisher SportsLine USA -- currently trading in the
midteens, down from a 52-week high of 39 5/8 -- is regarded as the only other
public pure-play Internet content company. While CNET's stock has faired
better since its IPO in 1996 -- it sits at 45 5/16, beneath a 52-week high of 74
1/2 -- neither firm has fetched the stratospheric market values of other
Internet firms.
"The Internet remains a very utility-oriented medium," said Mr. Keane.
"EarthWeb could have potentially greater success in the market because
they're targeting business-to-business [audiences]."
Still, other Internet content companies are hoping to make a go of it in the
public markets. Financial news Web publisher MarketWatch has filed for an
IPO and print publisher Ziff-Davis is planning to spin off its ZDNet Internet
operation into a separate tracking stock. Like other Internet media firms,
though, EarthWeb is promoting the community-oriented aspects of its sites,
which allow developers to commiserate online. Shares of Web community
GeoCities has performed strongly of late, while others have been less
fortunate: Last month, another Web community firm, theglobe.com, yanked
its IPO due to market skittishness.
Now, though, EarthWeb's strong debut may have shown a more permissive
atmosphere for speculative IPOs. In the past two months, "only companies that
could go with confidence were the bigger players," said Paul Bard, an analyst
at IPO research firm Renaissance Capital Corp. in Greenwhich, Conn.. "That
attitude seems to have shifted 180 degrees to where it is now."
Meanwhile, other analysts said other tech offerings might not be far behind
EarthWeb. "This is excellent news," said Tom Taulli, research director for
Silicon Investor, an online financial-information site. "This is the break we've
been looking for."
Is the part I bolded accurate specifically to AMZN?
Glenn |
