Good summary from Hoovers:
World Awaits WorldGate IPO April 13, 1999
By Chris Nerney
Senior Analyst Midday Report Archives
Though it's taking longer than many people expected, the Internet and television are moving toward a day when they will be inextricably linked and dependent on each other.
For they are the two most important mass communications mediums of our lifetime, which, rather than setting them up as competitors, actually makes them better suited to complement each other. What that means, of course, is opportunity, especially for companies that are the early leaders in helping to forge this technological union.
One such company is WorldGate Communications, which provides cable television subscribers Internet access through set-top boxes connected to their televisions. Based in Bensalem, Pa., WorldGate is expected to go public this week. The company hopes to raise $58.5 million through the sale of 4.5 million shares at $12 to $14 each under the Nasdaq ticker symbol WGAT.
WorldGate offers something that is in high demand in the modem-restricted world of cyberspace - fast Internet access. It also offers a truly unique technique for integrating the interactivity of the Internet with television content. Channel Hyperlinking enables a viewer watching a participating television show or commercial to link to a related Web site at 128 kilobits per second, twice the speed of the fastest modem now available.
(While that might not sound like much, it's vastly superior to merely flashing a URL at the bottom of the screen, or turning over the newscast to the network's "Internet reporter," who reads a couple of e-mails from viewers in Peoria.)
Being an early leader in a potentially huge market seemingly puts WorldGate in a great position. But the company is deep in a hole - though it was founded in 1995, aggregrate revenues through last year were only $1.2 million, while accumulated deficit was $51.9 million. Further, it finds itself dealing not with Hollywood and glamorous network executives, but with cable operators. WorldGate is dependent to a large degree on marketing support from this distinct and often difficult breed. And the company also must rely on set-top box manufacturers to include WorldGate access.
On the competition front, while WorldGate may in the first wave of television-Internet companies, it is considerably behind @Home, which has exclusive deals with big cable players such as Cablevision, Comcast and Cox Enterprises.
WorldGate also is using a lesser-known lead underwriter, Gerard Klauer Mattison, which some analysts think might act as a drag on the IPO. Several IPOs headed by non-marquee underwriters have performed well in recent months, though none have achieved the altitudes of companies such as @Home, which nearly two years ago offered shares to investors at $10.50 each, and which closed yesterday at almost $190 a share. This doesn't make WorldGate a bad bet; it just means investors shouldn't expect a first-day moonshot. |
