Divine InterVentures Plan Requires Some Intervention: IPO
quote.bloomberg.com
Hi Kemble! I have been following the press on this IPO. It will be something worth watching. :)Leigh
Focus
By Ron Day
Lisle, Illinois, April 15 (Bloomberg) -- Divine interVentures
Inc. has former basketball star Michael Jordan, Microsoft Corp.
and Dell Computer Corp. behind its $140 million initial public
offering.
What it lacks, aside from earnings and significant sales, is
a receptive stock market.
Divine is an Internet venture fund that invests in start-up
companies, mimicking the business plans of CMGI Inc., one of its
backers, and Internet Capital Group Inc., which has a seat on
divine's board. If it weren't for the 35 percent drop in the
Nasdaq Composite Index since reaching a record last month, divine
might have been the next Web-related IPO to blast into orbit.
``Three months ago, we liked them,' said David Menlow,
president of IPOFinancial.com, which tracks the performance of
IPOs. ``Now we are worried about their prospects.'
Four other companies, including Crown Media Holdings Inc., a
unit of Hallmark Cards Inc., were worried enough to cancel their
IPOs after the Nasdaq's 355-point decline yesterday. More than 25
companies have dropped plans to go public in the past few weeks.
Divine plans to sell 20 million shares for $6 to $8 each this
month. It expects to use the money to buy stakes in new Web-
related companies or funnel cash to some of the 52 companies that
it already backs.
Grand Ambitions
A few weeks ago, divine had grander ambitions and was
counting on raising as much as $400 million in its IPO.
The slump in shares of computer-related companies forced
divine to change plans as investors signaled waning interest in
the offering.
Divine quickly got help from Microsoft and CMGI as well as
Compaq Computer Corp. Hewlett-Packard Co. and Level 3
Communications LLC. These companies and others agreed to buy
36 million shares at the same time as the IPO, raising
$249.2 million in a private sale. Dell had previously bought a
$100 million stake in divine.
Divine reduced the size of the IPO ``to meet limited or
dwindling demand,' Red Herring Communications IPO analyst John
Fitzgibbons. ``The big business support is good, but you still
have 20 million shares to sell.'
The offer is being managed by a group led by Credit Suisse
First Boston. It will trade on the Nasdaq Stock Market under the
symbol ``DVIN.'
Start-up for Start-ups
Divine is itself a start-up, founded less than a year ago by
Andrew ``Flip' Filipowski, 49, best known as founder of Platinum
Technology International Inc., a maker of database and computer-
network management software. Computer Associates Inc., the world's
No. 4 software maker, bought Platinum for $3.1 billion last year.
Filipowski walked away with $291 million, some of which he plowed
into divine.
The son of Polish immigrants who wears his graying hair in a
ponytail, Filipowski has describes divine as an ``Internet
zaibatsu,' a reference to Japan's system of family control of
financial and industrial companies.
Divine, based in the Chicago suburb of Lisle, Illinois,
provides venture capital, offices, and legal and promotional help
to companies in which it holds stakes. The businesses range from
Internet advertisers to online plastics traders to Web-site
designers.
Because many are housed in divine's headquarters, the
companies are supposed to interact and help each other grow,
divine said in Securities and Exchange Commission filings.
Eventually, some of the companies may go public, giving divine a
return on its investment.
Some Sales, No Profits
Divine owns pieces of, or has made commitments to invest in,
the start-ups, giving it stakes ranging from less than 1 percent
to more than 80 percent. It has bought or agreed to pay $335
million for those stakes. Only a handful of the companies have
annual sales of more than $10,000 and none of them are profitable.
Filipowski has drawn plenty of attention to himself and his
newest business venture.
When divine said in December that it was building a
$60 million ``habitat' for some of its partner companies, Chicago
Mayor Richard M. Daley said it would help make the city a ``world
leader in high technology.'
Along with retired Chicago Bulls basketball legend Jordan,
Filipowski has packed divine's 38-member board with Chicago-area
luminaries such as William Wrigley Jr., chief executive of Wm.
Wrigley Jr. Co., and Tellabs Inc. Chief Executive Michael Birck.
Both men have fortunes that Forbes magazine last year estimated at
$2.7 billion.
``Flip is a master show person and a master strategist,'
said Mark Achler, partner in Chicago-based venture capital firm
Kettle Partners LLC. ``He gets people access to resources. This
will be a successful IPO.'
Divine, analysts said, will need his help.
``In this less-confident market, investors tend to be less
tolerant of companies with aggressive burn rates who will require
additional financing,' said Bill Tuebo, assistant portfolio
manager at LCM Internet Growth Fund. He hasn't determined if the
fund will invest in divine.
Burning cash is what Internet venture capital investing is
all about. The question for investors is how much fuel they're
willing to give to Filipowski. |
