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Technology Stocks : Rhythms NetConnections Inc. (RTHM) -- Ignore unavailable to you. Want to Upgrade?

To: LABMAN who wrote (33)	4/7/1999 5:33:00 PM
From: SteveG	Read Replies (2) \| Respond to of 378

from Dow tape: <A> =Rhythms NetConnect IPO-2: Co To Offer High-Speed Web Access By Dunstan Prial NEW YORK (Dow Jones)--Shares of Rhythms NetConnections Inc. (RTHM) rode the Internet wave to a strong debut Wednesday on the Nasdaq Stock Market. The Englewood, Colo., company is developing and installing a high-speed local access network that will provide small to mid-size businesses quicker access to the Internet. The network is referred to as an overlay network because it can be installed using existing copper phone lines, which will save the company money during the installation process. Rhythms NetConnections raised $197 million through the sale of 9.4 million shares at $21 each, $1 above the expected price range of $18 to $20. Strong pre-pricing demand allowed the company and its lead underwriters - Merrill Lynch & Co. and Salomon Smith Barney - to increase the price range on Wednesday from between $15 and $17 a share. The stock opened at 56 - a 167% premium - and has since climbed in the aftermarket. It traded recently at 64, after touching a high of 70. The sale represented a 13% stake in the company. With 70.6 million shares outstanding after the offering, the IPO generated a market capitalization for Rhythms NetConnections of $4.5 billion at the most recent stock price. Proceeds from the offering will be used to enhance the network in the company's existing markets, and to continue the installation of a national network. Paul Bard, an analyst with Renaissance IPO Fund, Greenwich, Conn., said Rhythm NetConnections is in a race with at least two other companies to install a national network using new so-called digital subscriber line, or DSL, technology that increases access speed to the Internet. "Networks are currently being constrained with respect to access speed. This is a new technology that can alleviate that," Bard said. Rhythms NetConnections hopes to emulate the success of a recent IPO from Covad Communications Group Inc. (COVD), another provider of high-speed access to the Internet using DSL technology. Covad Communications priced 7.8 million shares in January at $18 each and traded recently at 71, just off its all-time high of 73 3/8. Investors were apparently nonplussed by the fact that Rhythms Netconnections is not only incurring significant losses, but has barely begun to generate profits. In calendar year 1998, its first full year of operations, Rhythms Netconnections lost a staggering $36.3 million on revenues of just $528,000. Analysts say the latest trend in the IPO market appears to be successful offerings from companies that are not only posting losses, but hardly have revenues. On Wednesday, for example, investors had two deals to choose from in the new-issues market - Claimsnet.com Inc. (CLAI), a start-up electronic-commerce concern with huge losses and minimal revenues, and PLX Technology Inc. (PLXT), a 14-year-old company with a solid history of earnings and revenue growth. Claimsnet.com ended the day at 16 1/2, up 106% from its offering price of $8. It traded recently down 3 at 13 1/2. Meanwhile, PLX Technology closed Wednesday with a more modest gain of 35%. The stock traded recently 13 1/4, up 4 1/4 from the $9 offering price. Renaissance IPO Fund's Bard said Rhythms Netconnections likely rushed ahead with the IPO while still in its early developmental stages in order to be one of the first companies of its kind to tap the public markets. In addition, the company needed the money to continue the rollout of its network, he said. As is common with start-up Internet concerns, Rhythms Netconnections prospectus warns investors that losses are expected to continue for the "foreseeable future." (END) DOW JONES NEWS 04-07-99 12:37 PM