Todays WSJ 'Heard on the Street' talks about this also...
John
Heard on the Street
Web Firms Race to Issue
IPOs
Before Market Reverses
Course
By TERZAH EWING and AARON LUCCHETTI
Staff Reporters of THE WALL STREET JOURNAL
With Internet-related stocks careening, young Web companies
are racing ahead, hoping to go public before the IPO market
unhinges from its track.
Like Proxicom. Raul Fernandez, founder and chairman of the
Reston, Va., developer of e-commerce strategies, was set to
price its initial public offering of 4.5 million shares Monday night.
But Mr. Fernandez says he sweated as Internet stocks from
America Online to iVillage plunged Monday.
"Issues about postponing the offering
were definitely going through my head,"
Mr. Fernandez says. "I was pulling up
[news]wire stories that said things like
'Tech Crater.' "
But investor demand for Proxicom was
strong. So he and his underwriters at BT
Alex. Brown plowed ahead. Now they are sighing with relief:
Proxicom shares priced above their original range, at $13 a
share. After another nervous morning Tuesday, Mr. Fernandez,
on BT Alex. Brown's trading floor, watched the shares rise. They
ultimately closed at $19.50 a share, up 50%.
It feels like being in battle "and living to make the movie," he
says.
But how long will the show go on? The Dow Jones Internet index
recovered some of Monday's losses Tuesday, ending at 247.5,
up 22.65. The index is up 65% this year. But it is down 22% from
its all-time high for the year, set just a week ago Tuesday.
Some Internet IPO investors already are pulling back. And that
portends lessening demand, raising the risk that at least some
potential IPOs could hit a wall.
Pending Net IPOs
Issuer
Week Expected
Amount
(millions)
Log on America
April 19
$15.0
Launch Media
April 19
44.2
Mapquest.com
April 26
50.6
Mpath Interactive
April 26
42.9
Marimba
April 26
56.0
musicmaker.com
Late April
24.0
Dag Media
Early May
8.6
Media Metrix
May 3
39.0
Flycast Comm.
May 3
48.0
Comps.com
May 3
45.6
Netobjects
May 3
72.0
Silknet Software
May 3
33.0
Network Access Sol.
May 3
N.A.
N.A.= Not available
Source: CommScan
William Keithler, portfolio manager of the $1.5 billion Invesco
Technology Fund, as well as a smaller fund, until recently had
been a big IPO buyer. Last month, Mr. Keithler snapped up
shares of IPOs MiningCo.com and Critical Path, a San Francisco
provider of e-mail hosting.
Now, he is scaling back. Mr. Keithler says most companies ready
to come public have already done so. "We're starting to scrape
the barrel on the quality of companies coming public," he says.
In the past month, he notes, more fledgling Web concerns are
vying to go public that are younger, less experienced and further
from profits. "If we get another wave of selling in the Internet, a lot
of these deals are likely to get postponed," Mr. Keithler says.
Recently, an Internet-content provider planning to go public visited
Invesco's offices in Denver and told Mr. Keithler the company
would break even on its books in 2002. "That's an Internet
lifetime," he says.
He passed on that deal and others he says "take advantage of
the market's enthusiasm for Internet companies."
Even some large Internet underwriters say a market correction
wouldn't necessarily be a bad thing. "There are still some
high-quality companies coming out, but the quality mix appears to
be declining," says Dan Case, chairman of Hambrecht & Quist.
With the recent drop in Internet valuations, he adds, "hopefully,
quality mix by some underwriters will improve."
Meanwhile, most Web companies are holding course -- for now.
Log On America, a small Providence, R.I., provider of Internet
services, said it still plans to launch its IPO as early as this week.
And Net Perceptions, an Internet software company in
Minneapolis, is still planning to start trading Friday, even as its
lead underwriter BancBoston Robertson Stephens is canvassing
investors in the deal to see if they still want to participate.
"It's prudent to do that anytime we get a day" like Monday, says
Ken Fitzsimmons, director of capital markets at BancBoston
Robertson Stephens.
Indeed, investors could be forced to ratchet down expectations
for first-day fireworks. Tuesday, Internet Financial Services rose
4, or 57%, to 11 in its first day of trading. That is still a solid return
but nothing like the stratospheric first-day leaps of companies
such as theglobe.com (up 606%) and MarketWatch.com (up
474%).
Moreover, several recent Internet IPOs have quickly lost
momentum and fallen below their first-day highs.
The stock of WorldGate Communications, which offered its
shares last week, has fallen 30.9% from its post-IPO high of
$43.75, set on Friday, though it is still up 44% from its offering
price of $21 a share. "Nobody wants to see their stock drop,"
says Randall Gort, a spokesman for the Bensalem, Pa.,
company, which provides Internet access through cable systems.
"As an IPO, there's no stability in the stock yet. It's too short a
time. We haven't even tracked our shareholders yet."
Internet IPOs weren't the only companies quaking from the
market's jitters. Canadian Net-auctioneer Bid.com International,
already listed on the Toronto Stock Exchange, listed its stock on
the Nasdaq Stock Market just in time for it to fall 3 13/16, or 23%,
to 12 13/16 in its debut. "Being the new kid on the block, we
probably were impacted by the overall jitters" in Internet stocks,
says Jeff Lymburner, president of the Mississauga, Ontario,
company.
Meanwhile, some underwriters are shrugging off the recent
Internet carnage. "I do not think [Monday] was a defining moment
for the Internet equity market," says Doug Baird, managing
director, equity capital markets, at BT Alex. Brown. "It may be a
tremor. Maybe we'll look back in history and say that was the first
shock wave."
BASKET CASE: Investors trying to ride the drastic reversals in
stock-sector performance have sent volume rocketing in several
new stock "basket" products listed on the American Stock
Exchange.
Trading volume in Diamonds, a unit trust based on the Dow
Jones Industrial Average, has climbed to over four million a day
this week from a first-quarter average of 500,000. Volume in
S&P Midcap "Spiders," a unit trust based on the Standard &
Poor's index of 400 medium-capitalization stocks, also has
topped four million, compared with between 500,000 and one
million in the first quarter.
--Greg Ip
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