NEW YORK (CBS.MW) -- The 10,000 number may be consuming most of Wall
Street's attention Tuesday, but Flashnet Communications set off some
sparks when the Internet service provider went public.
Ft. Worth, Texas-based FlashNet (FLAS) priced its 3 million shares at $17
each, above expectations of a $14 to $15 estimated range that had already
been bumped up. BancBoston Robertson Stephens is the lead underwriter.
The stock opened at 39 -- the price at which most investors could buy the
stock -- and closed the session at 43 5/8 with 8.5 million shares changing
hands.
One other stock worth noting is Point West Capital (PWCC), a small San
Francisco firm that owns 1.2 million shares of Flashnet.
Many investors had played Point West as a way to get in on the FlashNet
IPO. Prior to Tuesday's debut, Point West's market cap increased from
$11.4 million to $55.7 million since FlashNet filed for its IPO late last
year.
Assuming that the difference is entirely due to the company's stake in
FlashNet, investors had been expecting FlashNet to begin trading in the
mid-30s, That's a bit lower than where the stock actually opened.
But like other "backdoor" IPO plays in the past year -- Creative Computers
for uBid, Data Broadcasting for MarketWatch.com, the publisher of this Web
site, and Winfield Capital for Cyberian Outpost -- the stock of Point West
began falling once FlashNet began trading.
Point West plummeted 3 11/16 to 13 5/8, still well above the 52-week low
of 2 1/4. See original story.
FlashNet's gain falls well short of the 241 percent average gain
experienced by the 14 Internet companies that have gone public so far this
year. That figure, supplied by CommScan's EquiDesk, has been boosted in
recent days by the strong post-first-day performance of a number of new
issues, including Bottomline Technologies and Onyx Software.
Prodigy Communications (PRGY), an ISP that went public this month, has
gained about 169 percent from its $15 offering price.
At recent trading prices, FlashNet has a market cap of about $3,200 per
subscriber. By comparison, leading consumer-based Internet service
providers EarthLink (ELNK) and Mindspring (MSPG) are valued at about
$2,250 and $2,750 per subscriber, respectively.
At the offering price, the stock looked attractive, said Ken Fleming,
analyst at Renaissance Capital.
"The market has even rewarded very small Internet service providers like
Internet America (GEEK) with valuations at $3,000 a subscriber," Fleming
said before the stock began trading.
Renaissance, a Greenwich, Conn.-based asset management fund that runs the
IPO Fund (IPOSX), picked Flashnet as its deal of the week.
Of course, Fleming like many others predicted that many of the smaller
players in the fragmented and low-margin Internet service provider
business won't be around in the not-too-distant future.
Management at FlashNet agreed at a recent road show presentation in San
Francisco. "What we see and what the analysts see is consolidation and
fallout," FlashNet President M. Scott Leslie said.
Leslie said the company plans to be one of the winners by offering "a
compelling price point and back[ing] it up with great service."
The company's customers paid on average $12.69 a month in the fourth
quarter, but the company plans on increasing that to the $15 to $16 range,
said Chief Financial Officer Andrew Jent.
One strategy FlashNet Communications employs to gain new subscribers is
its Amway-like multilevel marketing program, where independent contractors
earn money by recruiting new subscribers. About 17 percent the company's
180,000 subscribers have come on board through the marketing program.
"We're going to see great results in the next couple of years [through the
marketing program]. No other major ISP is doing this," Leslie said. |
