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Technology Stocks : Internet Capital Group Inc. (ICGE) -- Ignore unavailable to you. Want to Upgrade?

To: mact who wrote (214)	8/7/1999 11:57:00 AM
From: mact	Respond to of 4187

sorry for posting so many in a row but i thought u might this one interesting. Making exceptions By Alex Gove Redherring.com August 7, 1999 On Thursday, the Internet Capital Group's (Nasdaq: ICGE) IPO soared more than $12 in a flat market. But Paul Ryan, CEO of Acacia Research (Nasdaq: ACRI), was more excited about what happened before ICG's IPO. According to the Investment Company Act of 1940, public companies, such as ICG or CMGI (Nasdaq: CMGI), that own stakes in startups can't hold more than 40 percent of their assets in non-majority investments. The SEC does not want companies that are essentially mutual funds to pretend that they are operating companies. But on August 4, ICG won a one-year exemption from this ruling. ICG argued that it does not intend to sell its minority positions for a quick profit. Also, ICG stated that its focus on business-to-business e-commerce, its branding of its portfolio companies, and its active participation in its portfolio companies' management clearly demonstrate that it is an operating company, not an investment company. The Internet Capital Group did some strong recruiting before its IPO. CMGI needed stability to avoid being labeled a mutual fund. Companies like CMGI are hard to put a value on. The SEC's ruling is only valid for one year, and it is contingent upon ICG adhering to the conditions outlined in the exemption. Even so, Mr. Ryan says the fact that the SEC was willing to consider an exemption "opens the door slightly" for companies like his. OPENING THE DOOR Four years ago, Acacia filed a self-registered IPO, but Mr. Ryan says Acacia has "gone slow" as a public company because of the Investment Company Act's restrictions. In this overheated environment, he explains, very few entrepreneurs want to sell a majority position in their company. As a result, Acacia has primarily focused on acquiring intellectual property from companies that do not have a great likelihood of surviving as standalone public companies. One of Acacia's investments is Greenwich Information Technologies, which holds patents pertaining to specific implementations of video and audio on demand. Because of the SEC exemption, however, Acacia is contemplating starting an Internet media division through which it will acquire many more minority positions. This strategy will enable Acacia's majority-owned Internet media companies to gain an important "first look" at new technologies. In addition, he predicts there will be a "terrific cross-fertilization of talent" resulting from Acacia's involvement in more startups. Given ICG's exemption, Mr. Ryan thinks this division's specific focus on Internet media and its position as a long-term and active participant in the companies in which it invests should satisfy the SEC. In the long run, Mr. Ryan sees tremendous efficiencies in the kind of structure that companies like CMGI, ICG, and Acacia are pioneering. Because these companies are public, they can provide entrepreneurs with instant liquidity. Moreover, they can provide startups with the infrastructure to handle issues like accounting or human resources that otherwise might distract entrepreneurs from their core focus. Finally, they can benefit from the parent company's keiretsu. In Mr. Ryan's opinion, focused approaches like ICG's or the one that his company is considering will only make this structure more powerful. CMGI has had problems convincing the market that it satisfies the Investment Act, but its purchase of AltaVista squelched those concerns. With ICG's SEC exemption and the possible formation of entities like Acacia's Internet Media division, look for the creation of many more "public incubators."