IPO floodgates open, but lake stays full
By Peter D. Henig
Red Herring Online
February 16, 1999
The IPO gates have opened and tech companies are filing through at a healthy clip. And as fast as the registration pipeline can spit out booming public offerings, new companies are filing S-1s with the Securities and Exchange Commission, filling empty places in the IPO queue.
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In the past nine days alone, 8 of 13 IPO filings have been technology companies, nearly replacing the 9 of 13 technology IPOs that went public during that period, according to Securities Data Corp.
"Last week was one of the more active weeks for filings," says Steve Tuen, director of research for the IPO Value Monitor. "Technology stocks are still seen as the high-fliers in the stock market, so these types of companies are going to be the same ones who are the most aggressive about going public."
HALL OF FAMERS
"The IPO market is alive and well and bubbling and frothy," says John Fitzgibbon, an independent IPO analyst. "The name of the game is moonshot alley."
Two of the nine IPOs that priced last week -- Healtheon (HLTH) and VerticalNet (VERT) -- made it onto the top 10 all-time best first-day gainers list. Average IPO gains for the week were an incredible 60 percent. Even more amazingly, Prodigy's (PRGY) IPO -- widely considered a company late to hit the comeback trail -- ended last week 343 percent above its offering price.
"The driving factor behind this is insanity.com, but it's spilling over into other technology issues as well," says Mr. Fitzgibbon. He says that hardware, software, and communications-related IPOs are performing as well as, if not better than, many of the Internet issues continuing to emerge out of registration. "Look at Perot Systems (PER)," he offers. "And even Prodigy -- my God, that company's been around too long to do well, but it's a sign of the times. ... They just do well no matter what."
It's no wonder, then, that IPO filings have increased significantly. Because IPO first-day performances have been so stellar -- regardless of broader market weakness -- and because a larger number of offerings implies more available slots to fill in registration, technology companies these days have every incentive to press their underwriters into filing for an IPO as an exit strategy, silly as some of their balance sheets appear.
But as eager as they may be, Mr. Tuen feels that the investment banks may still be holding some deals back for fear of entirely flooding the market.
"The banks are the ones pacing it," says Mr. Tuen. "It's not in anyone's best interest if there's too much supply and a new offering doesn't do well."
15 MINUTES OF WEALTH
Some of the choicest new deals to have filed recently are iXL Enterprises, Proxicom, and Marimba, with each one sporting its own fancy investment banking teams.
IXL, an Internet services company founded in 1996, is as much a roll-up strategy in progress as it is its own company. It's already acquired more than 34 Web, video, and interactive media companies covering strategic consulting, e-commerce systems, digital media services, Web site development, and Web publishing technology. Its $86.3 million IPO has lead underwriters Merrill Lynch, Donaldson, Lufkin & Jenrette, BancBoston Robertson Stephens, and NationsBanc Montgomery Securities.
Proxicom, a potential $75.0 million public offering for a company in the hot e-commerce services space, has the dubious distinction of having Thomas Weisel Partners as one of its underwriters. Mr. Weisel formed the firm recently when the former CEO of Montgomery Securities broke away after NationsBanc Montgomery Securities merged with Bank of America.
Proxicom not only provides e-commerce services to corporations, but also designs intranets while providing consulting, marketing, systems and network design, and third-party software integration.
But perhaps the biggest and most anticipated IPO among the superstars that have already debuted is Marimba's bid for a $56.4 million offering. The company, founded in 1996 by four members of the original Java development team at Sun Microsystems (SUNW), makes software that lets companies install, update, and maintain software applications and content directly within a company or across the Internet. The future moonshot IPO is backed by Morgan Stanley Dean Witter (MWD), Credit Suisse First Boston, BT Alex. Brown, and Hambrecht & Quist (HQ).
These IPO filings are yet another layer on top of soon-to-be-standout IPO pricings from the likes of WebTrends, Vignette, and Priceline.com, but equally indicate the fervor with which companies, bankers, and investors alike are pushing new deals to market.
But it doesn't much matter which of the three is pushing these deals the hardest. "In order to have a dance, you need the orchestra and the two partners," says Mr. Fitzgibbon. "In this market, you've got a romance of all three." |
