uBid IPO seen hot despite dip in Internet stocks
Reuters Story - December 02, 1998 15:18
By Reshma Kapadia
NEW YORK, Dec 2 (Reuters) - Although Internet stocks have taken a beating and retraced some of their exponential gains this week, analysts still expect online auctioneer uBid Inc. to have a successful initial public offering.
"There is still a lot of demand (for Internet stocks), especially IPOs, because investors are looking to get onto the ground floor to
invest in Internet stocks," said Steven Tuen, an analyst at IPO Value Monitor.
The Elk Grove, Illinois-based firm operates an online auction for excess merchandise, offering close-out and refurbished consumer
electronics and computers. It is expected to go public later this week, offering about 1.6 million shares at $13 to $14 per share.
Merrill Lynch is the lead underwriter on the deal.
The company has had losses since inception and expects to continue to incur losses for the foreseeable future, according to its U.S. Securities and Exchange Commission filing. For the three month period ended March 31, the online auctioneer posted a net loss of $895,000. Revenue totaled $2.075 million.
In July, uBid's parent company, computer marketer Creative Computers Inc. , decided to spin off the unit in an offering, hoping to raise $20.54 million. Creative Computers will retain 82.3 percent of the shares.
Online retail is a hot area these days. The largest online retail category in the U.S. is expected to be computers and consumer electronics -- an industry that is forecasted to grow to $10.5 billion by 2002, according to Jupiter Communications.
Analysts said the success of online auction firm eBay Inc. , whose stock was offered at $18 per share and was last trading at 199-1/4, may be a mixed blessing for uBid.
"The disadvantage, of course, is that it is the third online auctioneer. OnSale Inc. , the first, was fairly dormant until recently. eBay burst onto the scene and was a wake-up call, so now that uBid is coming up, investors may look at it and say 'if eBay could do it, uBid can,'" said Jay Kim, an analyst at Paul Kagan Associates in Carmel, Calif.
However, David Menlow, president of IPO Financial Network, said eBay's appearance may have made it more difficult for new technology firms without profitability.
"I think eBay is a bad event for all the Internet stocks because it changed the entire Internet landscape. The market had accepted that the companies had to work on profitability, but then eBay came to market with a profit," Menlow added.
There are also some major differences between uBid and eBay other than the fact that the former is not yet profitable.
"uBid has a lot more competition and it is more limited in what it does. It only sells refurbisheds and close-outs, so it does not offer
as broad an assortment of products," Tuen said.
Among its competitors are OnSale, Egghead.com Inc.s unit Surplus Auction, and personal computer manufacturers.
Gaining profitability will be challenging, but the question will be how quickly uBid can win consumers, sign distribution deals and
create a community around the site, Kim said. "uBid is going to do well because of the appetite for Internet stocks. Those buying
Internet IPOs are buying them at a discount," Menlow said. |
