Briefing.com comments
MARKETWATCH IPO. Marketwatch is due to come public any day, and has applied for the symbol MKTW, by which we
will refer to the company. Before reviewing our thoughts on this IPO, please consider the following. Marketwatch runs the
cbs.marketwatch.com site, which in a general sense is a competitor to Briefing.com. However, a strong performance in the IPO
would certainly make the shareholders of our privately held company feel good. The November 25 S-1/A filing for MKTW raises
some questions about the financial outlook for the company. MKTW showed only $65,000 cash on hand as of September 30 and
a negative working capital balance. DBCC kicked in another $1 million in October, which was needed to make payroll, because
they are losing a lot of money. For the quarter ended Sep. 30, MKTW had revenues of 1,799,000, a 18% increase from the
second quarter revenue of $1,519,000. Despite the revenue gain, the operating loss increased from $1,573,000 to $2,490,000. That
means in the third quarter they lost $0.28 per share based on the actual shares outstanding at that time. Expenses are obviously
ramping fast, and MKTW even benefits from having (pre-IPO) 50% owner Data Broadcasting (DBCC) provide their web
infrastructure costs. The IPO is expected to be priced at $10 to $12. At $11, that would give MKTW a market cap of $129
million. Frankly, that seems fair to Briefing.com, but all Internet IPO's seem to catch fire these days. How high could it go?
Compare MKTW with their sister company Sportsline.com (SPLN), also partly owned by CBS. SPLN had revenue in the third
quarter of $7,431,000, or over 4 times as much as MKTW. SPLN loses equally impressive amounts of money, but SPLN now
has a market cap of $342 million. At 4 times the size, with similar business plans and similar gross margins, SPLN would have a
market cap of 2 1/2 times MKTW at the IPO price. That means that if MKTW doubles (very possible) immediately after the
IPO, it will have about the same value as SPLN. Of course, the two companies address different markets. But they are very
similar in structure. Eventually, the market may value the companies in a similar manner. If so, any early frenzy in MKTW stock
will be hard to sustain unless MKTW posts some superb revenue gains over the next couple of years. |
