IPO VIEW - Foreign Internet deals seen mesmerizing
NEW YORK, Aug 1 (Reuters) - Newly minted stock from Internet Initiative Japan Inc. and Israel's Internet Gold will come to market this week in hopes of
tapping into the U.S. investor lunge for overseas cyber ventures.
Recent offerings from abroad, such as China.com Corp. (Nasdaq:CHINA - news) and the UK's Freeserve Plc (Nasdaq:FREE - news) (quote from Yahoo! UK
& Ireland: FRE.L) received hearty welcomes, even as the overall U.S. market shook amid concerns inflation is heating up and the Federal Reserve may again
pull the trigger on interest rates.
''I'm shaking my head,'' said Peggy Farley, president of Ascent Asset Management, adding that she was concerned about the quality of some of the deals
coming to market.
''I still think the hype is not out of the market. Foreign companies look at this as an opportunity to raise capital because Americans will buy anything right now.''
The U.S. thirst for Internet ventures, some of them complete wild cards, continues to puzzle industry watchers. But the desire to get a piece of the Internet
revolution that has put money in so many pockets is still in place.
''The appetite to look global at this point is definitely the future and (reflects) the broadening out of the market,'' said Tom Taulli, an analyst at EdgarOnline Inc.
''The IPO market is in its own cocoon and is ignoring the of the world. People just love IPOs because it is the opportunity to get in on the ground floor and
other Internet companies are maturing, so (they are moving to those) in newer, emerging businesses.''
Israel's Internet Gold is one of the companies set to benefit from the recent sentiment. It has the largest market share in Israel at 34 percent, said Jennifer
McBrien, an analyst at Renaissance Capital Corp.'s IPO Plus Aftermarket Fund.
''This will generate a lot of interest because it is in Israel and there is such a technology-inclined community there,'' McBrien said. Foreign Internet deals have
offered investors a way to get in at a company's inception, she added.
Internet Gold is expected to offer 4.5 million shares in a range of $11 to $13 through lead underwriters Lehman Brothers.
Similarly, Internet Initiative of Japan is expected to be hot because it gives investors another chance to tap into the Asian Internet movement.
It is slated to offer 6.56 million American Depositary Shares in a range of $18 to $20 through lead underwriter Goldman Sachs.
There is also a clutch of domestic e-deals for investors, among them an Internet venture group, a couple of flower companies and an online community site for
women.
Internet Capital, which manages and operates a network of electronic commerce firms, is seen as benefiting from the recent enthusiasm for companies engaging
in business-to-business Internet services.
''They recently hired a top Microsoft (Nasdaq:MSFT - news) executive, and it was one of the investors in VerticalNet Inc. (Nasdaq:VERT - news),'' said
Taulli.
VerticalNet went public at $16 in February and was last trading at above $89. ''They have about 29 companies in their portfolio. It's a way to play the
business-to-business market, which is the next stage,'' he added.
Internet venture firm CMGI Inc., to which some are comparing Internet Capital, has more business-to-consumer companies in its portfolio, Taulli added.
Two online flower outlets will also come to market.
''It's a big flower week,'' said Gordon Anderson, editor-in-chief of Hoover's Online Inc., noting the scheduled debuts of 1-800-FLOWERS.com and
Ftd.com.
''Flowers and gifts are among the more popular (e-commerce items) because they are an impulse buy. It's a good theme and both companies are
well-branded.''
Women's publications via the Internet will also be up for grabs.
''Women.com has relationships with Hearst, which provides (them with) 10 women magazines so they have all the content. There are other similar sites, but the
way Women.com is set up and the amount of content and relationships it has tends to give it an advantage,'' said Mary Lupo, an analyst at Renaissance Capital
Corp.
Hearst will control 48 percent of the company, which competes with companies like iVillage Inc. (Nasdaq:IVIL - news), she added.
Many analysts and fund managers have complained that the majority of deals coming to market barely have an operating history and little in the way of
revenues.
But even if the broad market endures more down days, Internet firms with the right formula will be able to weather the storm, some say.
''We look at what the company's landscape looks like. Will they be the first in and is their business model sustainable? (Also,) we always invest in
management, and we like cash flow and invest in companies that have the potential to have positive cash flow in a relative short time,'' said Harry Wallaesa,
president of Internet venture firm Safeguard Scientifics Inc (NYSE:SFE - news).
Safeguard holds about a 20 percent stake in Internet Capital Group, which is slated to debut this week.
Others are less sanguine about overall market appetite and momentum, saying maybe only a few headline-grabbers will do well.
''The market is clearly tired and there are enough deals in the pipeline to still have deal flow, but only a handful of very high visible companies will do
extraordinarily well and keep their gains in the aftermarket,'' Anderson said. |
