IPO VIEW - One-shot wonders won't save the market
Reuters Story - September 27, 1998 15:29
By Stephanie Borise
NEW YORK, Sept 27 (Reuters) - The market for initial public offerings received a shot of excitement with the hugely
successful debut of online auctioneer eBay Inc. , the first IPO to trade in a month, but that does not signal a recovery in the
status of new issues.
eBay made a cannonball splash Thursday on Nasdaq, soaring 163 percent and catapulting itself into an arena that has been too
nauseous from global stock volatility to take a risk on an IPO. Its shares closed Friday at $44.875, giving the San Jose,
Calif.-based firm a market capitalization of $1.78 billion.
But as the fever surrounding eBay, not seen since free Web site provider GeoCities went public on Aug. 11, helped the dreary
IPO state along, analysts said that one deal alone cannot bring a market back from the dead.
"eBay put a shot of adrenaline back into IPOs, but it is not the litmus test for the viability of the market," said David Menlow,
president of IPO Financial Network.
"It just reaffirms that the good deals are going to be in very serious demand," he said.
"Until there are a number of transactions that get done successfully, with name-recognizable companies, we are going to have
an inactive IPO market," added Howard Posner, syndicate manager at A.G. Edwards.
Two other Internet related stocks were overshadowed by eBay's surge, adding to the belief that only the strong deals will
survive, especially under still shaky conditions.
Galacticomm Technologies Inc., , an Internet software company, went unnoticed when it debuted on Nasdaq on the same day
as eBay. It sold 1.8 million shares for $6 each and 1.8 million warrants for $0.10, but the shares closed Friday at $4.50.
And Internet retailer Value America Inc., which sells technology, office and consumer products, postponed its planned IPO on
Tuesday citing market conditions.
The Charlottesville, Va., company planned to sell 5 million shares at $14-$16 each in a deal underwritten by BancAmerica
Robertson Stephens.
Value America is likened to Cyberian Outpost Inc., , the online PC retailer that started with a bang on its first day of trading on
July 31, but is now trading at around $7.75, less than half its $18 offering price.
"But all eyes are on eBay," said Kathleen Smith, portfolio manager for Renaissance Capital Corp. "It tells you that there is a lot
of enthusiasm for a new, fast-growing company. And they're not worried about the global depression."
But eBay did pave the way for some well-known Internet companies to make, or solidify, plans for an offering.
Early Friday morning, Internet service provider Prodigy Communications Corp., a pioneering online service that has shed its
extensive content services to focus on providing Internet access, jumped on the bandwagon with plans for an IPO.
"The Internet service companies are getting a lot of attention, and right now that seems to be one of the areas that both
institutional and retail investors will invest in, so I think there will be some followthrough there, but that doesn't signal the
opening of a very narrow window that currently exists," A.G. Edward's Posner said.
Barnes & Noble Inc.'s online book store barnesandnoble.com moved its plans forward for an IPO, filing for up to $100 million
of common stock in a bid to compete with Amazon.com Inc. .
"The name Prodigy is still going to carry the connotation of information content," said Menlow. "Without knowing the terms,
this is going to be an uphill sale."
With only minor deals coming this week, if at all, analysts are looking to the first week in October to test the market again with
a piece of the global offering of Swisscom AG [SWIS.CN], the public telephone carrier owned by the Swiss government.
"eBay passed the test with flying colors," said Renaissance Capital's Smith. "Swisscom will be a good test."
Swisscom will be biggest IPO in Europe this year and the biggest ever in Switzerland. It could fetch up to $6.54 billion,
(around 9.05 billion Swiss francs) in a deal underwritten by Warburg Dillon Reade and JP Morgan Securities.
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