Investors Await IPOs From Martha Stewart, WWF Next Week
Dow Jones Newswires
NEW YORK -- Next week's most talked-about initial public offerings will come from Martha Stewart Living Omnimedia Inc. and World Wrestling Federation Entertainment Inc.
On the surface, the enthusiasm for both deals suggests that investors are hungry for non-Internet deals but the companies do have ties to the Web. "You could say that these are Internet companies underneath," said Kathy Smith, portfolio manager at the Renaissance Capital IPO Plus Aftermarket Fund (IPOSX) in Greenwich, Conn.
That is not to say people are ready to slap a "dot-com" on the end of either company's name. On the contrary, investors of all stripes have been drawn to both deals particularly because they have broad product lines and household names not found among most Internet stocks. But Internet investors like the way both companies have leveraged their strong brands online.
"Martha Stewart is a publishing and television company and World Wrestling is a televison enterprise," said Ben Holmes, president of ipoPros.com Inc., a Boulder, Colo., firm that tracks new issues. "No one is confusing these guys with Internet companies. But they're household names, and Internet investors are looking at brands as one of the characteristics they want in a company."
Each company has a long way to go to cement its Internet presence, but both are trying. Martha Stewart has made an expansion of her marthstewart.com site -- and, more importantly, product sales from it -- a top priority. Though officially still in an "introductory phase," according to the offering's prospectus, the site already has 925,000 registered users, and Internet and direct-commerce revenues have ramped up significantly, representing the fastest-growing sales area in the company. In the first six months of this year, Internet and direct-commerce sales stood at $13.9 million, or about $800,000 shy of the total for that group for all of last year.
Moreover, while any company can talk about its Internet strategy, Stewart has lined up some high-profile help, namely Silicon Valley venture-capital guru John Doerr of Kleiner Perkins Caufield & Byers. Doerr, who sits on the company's board, has been behind such marquee Internet names as Amazon.com Inc.
Doerr's firm bought 5% of Martha Stewart Living Omnimedia for $25 million in July and he is advising the company on its Internet strategy, including the possibility of selling or spinning off the business. Kleiner Perkins would own 15% of the spinoff or get 15% of the proceeds if the Internet operations were sold.
With the WWF, the Internet connection is a bit more of a stretch. Mostly known for its pay-per-view and cable wrestling events, the company has seen interest increase in its own site, wwf.com. According to WWF's prospectus, Internet-ratings company Media Metrix put the number of visitors on the site at 1.6 million for June, making it the fourth-ranked sports site behind ESPN, SportsLineUSA and CNNSI. That's made it a hot advertising channel for companies trying to reach the young, male demographic.
For the WWF's fiscal first quarter ended July 30, new media operations, run by company head Vince McMahon's 29-year-old son Shane, contributed just $1.3 million to the concern's $76.2 million in total revenue, but that total rivalled the $1.7 million from publishing ventures.
In a snapshot of year-over-year growth, June merchandise sales on the site rose 32% to $206,600 from $156,900 in June 1998. And the Internet represents such potential for the WWF that it is building an Internet-focused advertising sales force.
While interest from Internet investors will almost certainly push the stocks higher in initial trading next week, the big factor that could hold both companies back is that they have what most Internet stocks don't: earnings.
For its fiscal 1999 ended April 30, the WWF reported net income of $56 million on revenue of $251.5 million. Martha Stewart's company earned $14.2 million on $111.5 million in sales for the first six months of this year.
"Most Internet companies don't have the grounding of earnings," Smith said. "It's always a little difficult to put a value on them, so they're all over the place."
Though the companies may not see the lofty heights that recent offerings from Foundry Networks Inc. and Red Hat Inc. have enjoyed, that doesn't mean they won't be strong, Smith said. "You don't have to go up 400% on your first day to be considered well-received," she said.
One other factor that analysts said could temper both offerings is the broader market. A higher-than-expected 1.1% hike in wholesale prices and comments by Federal Reserve Chairman Alan Greenspan that suggested a more cautious approach to stocks, prompted a selloff Friday. If it were to continue into next week, that could change the market dynamic for new issues.
Next week's calendar also includies the following issues:
- BSquare Corp., Bellevue, Wash., which integrates the Windows CE operating system into so-called intelligent computing devices like palm-held computers and gaming devices, is offering 4 million shares through lead underwriter Credit Suisse First Boston Corp. Price talk is $12 to $14 a share.
- eMed Technologies Corp., Lexington, Mass., which makes systems to store and transmit medical images like X-rays, is offering 3.1 million shares through lead underwriter Bear, Stearns & Co. Price talk is $12 to $14 a share.
- Sycamore Networks Inc., Chelmsford, Mass., which makes products that enhance high-speed voice and data lines, is offering 6.5 million shares through lead underwriter Morgan Stanley Dean Witter. Price talk is $18 to $20 a share. |
