Why IPO Investors Should Stake Out iTurf-- Standard & Poor's.
JK :
thanks for that links,while visiting S&P Personal Wealth I ran into this article.
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Wednesday April 07, 1999 (08:24 am ET)
Why IPO Investors Should Stake Out iTurf
By Mark Basham, S&P New Issues Analyst
NEW YORK, Apr. 07 (Standard & Poor's) - We recommend purchase of iTurf (TURF) as a short term buy. The story here is not new -- Internet IPO soars on first day -- but at least this company has a twist, which is its focus on Generation Y. It is the first company to come to market that is in this particular space on the Internet, which distinguishes it from the dozens of other Internet related IPOs in the pipeline. Investors who are unable to purchase iTurf before the price skyrockets may want to consider purchase of its parent dELiA*s Inc (DLIA)
iTurf is a destination Web site for Generation Y that links together the company's community based and e-commerce Web sites. Community Web sites offered are currently built around the gURL brand for Generation Y females. These include gURL.com which features a Web/zine and community features such as chat and posting boards, gURLnet.com which is a ring, or network, of linked third-party sites featuring content by and for Generation Y females, gURLpages.com which is a free home pages hosting services, and gURLmail.com, a free email service.
E-Commerce sites include dELiAs*cOm, the Web site for merchandise also sold through dELiA*s catalogs, TSISoccer.com based on the similarly named print catalog, and discountdomain.com, a monthly subscription-based discounted merchandise site for GenY females. Also, contentsonline.com sells home furnishings featured in the Contents catalog for GenY females, droog.com sells merchandise from the Droog print catalog of apparel and related items for GenY males, and dotdotdash.com sells apparel and related merchandise for girls under age 13.
iTurf seeks to become the leading destination on the Internet for young people between the ages of 10 and 24, of which there were an estimated 56 million in the U.S. in 1998. The Census Bureau projects that growth in this age group will outpace that of the general population between 1998 and 2010, topping 63 million by then. The prospectus cites projections from Jupiter Communications that e-commerce sales to teens and college students will grow from $600 million in 1998 to $3.8 billion in 2002, while ad spending targeted to GenY will increase from $500 million to $2.1 billion over that time. We think the e-commerce sales figure in 2002 is conservative.
dELiA*s owns all shares of Class B common stock, giving it control of the company. The company's relationship with its parent is important to it establishing a brand name and being first in this particular market segment on the Internet.
For example, the iTurf Web sites have a head start on reaching Generation Y through 10 million names in a database including six million who have made catalog purchases. Cross promotion of the Web sites in the print catalogs has clearly helped in the quick success of the sites in attracting eyeballs. The company states that page views on iTurf's Web sites grew sharply over the past year from 800,000 in February 1998 to about 35 million in January 1999.
In anticipation of heavy demand for the shares, underwriters increased the size of the offering from 3.7 million to 4.2 million shares, and the estimated offering price per share from $10-$12 to $16-$18.
Proceeds from the offering will be used for capital expenditures, marketing activities, repayment of debt to dELiA*s, and the purchase of $10 million of dELiA*s common stock. Sales of iTurf stock by dELiA*s are subject to a 180 day underwriter's lockup agreement and Rule 144 restrictions. The company is heavily reliant on third party computer software and systems, particularly of its parent. It has obtained warranties or assurances that its mission-critical software and systems are or will be Y2K compliant. It expected to begin testing of software in the first quarter of 1999.
At first glance, some investors may become overly optimistic upon seeing the small profit that iTurf had in fiscal 1999. Substantial losses are expected for the foreseeable future. The company in the past did not have certain operating expenses that are normally incurred. For example, it did not have an advertising sales team. It will seek to develop advertising on its Web sites other than a limited amount in past years that was arranged for through a third party. Also, it relies on dELiA*s to a large extent for order processing.
The offering will likely be compared to the recent, hugely successful iVillage offering. iVillage and iTurf are the first major public offerings by companies on the Web that are targeting their respective population segments. Both are targeting attractive market segments with substantial purchasing power. Both groups may be claimed to be under-served by general purpose destination sites. In hindsight, it could be said that market segmentation on the Web was obvious and inevitable, but these companies were first, and being first to go public definitely is an advantage. |
