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Normally the initial public offering of a company like Earthlink Network would
fall through the cracks. It made its public debut last Wednesday with zero in the
way of fanfare, with its stock yesterday rising a measly 38 cents above its
offering price to close at $13.38.
This, after all, appears to be nothing more than just another Internet service
provider, at a time when the business of providing Internet access is looking
more and more like a commodity. Like most of its rivals, Earthlink isn't making
a dime, and there's no telling when it will.
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But scan its prospectus, and you'll stumble on this nugget: its largest outside
investor is George Soros, the savvy New York trader, who has a 7.1 percent
stake.
Soros' doesn't talk publicly about his investments, so it's hard to say what
attracted him to Earthlink.
But by reading between the lines in its prospectus, the company apparently
intends to go on an acquisition binge and buy regional rivals as the Internet
access industry consolidates.
And rather than sink money into building a structure of its own to provide
Internet links -- it merely resells the services of others -- it's spending heavily
on customer service, which is a major source of irritation among users of
various Internet services.
Right now, Earthlink is in a good position: While America Online has around
800,000 modems that accept calls from 8 million members, Earthlink currently
has around 180,000 modems for around 250,000 users. And its customer
base is said to be growing by around 8,000 per week -- mostly by
word-of-mouth.
Oh, and this final point: Even George Soros could be wrong. The prospectus is
loaded with seven pages of possible risks. <<<<<< |
