More on the week's IPOs
[B] IPO REVIEW:After Monday's slaughter, Internet deals rise again
By Scott Reeves, Bridge News
New York--Apr 23--Internet stocks were slaughtered on Monday, but on Friday,
Net Perceptions (NETP) jointed the Moonshot Hall of Fame. This may mean
investors with a long-term view rather than flippers looking for a quick buck
are buying 'Net-related initial public offerings.
* * *
Internet stocks were bloodied Monday, sending the NASDAQ composite down
138.43 points, or 5.5%, to 2345.61, the index's second-biggest point drop and
seventh-biggest decline. Because most IPOs are small- or mid-cap stocks, the
market drop raised immediate concerns about the immediate future of the IPO
market.
"Market participants have become seasoned veterans," said David Menlow,
president of IPO Financial Network in Millburn, N.J. ""While they're going to
stop a bout of panic selling, they remain focused on the longer term and are not
overly concerned about pullbacks like we saw on Monday."
But Menlow believes the days of 30- to 50-point opening premiums are gone
for now because the market is saturated with Internet offers and investors have
difficulty in picking the market leaders from the hangers-on.
This week, a total of 11 deals raised $592.63 million. For the year to date,
a total of 111 IPOs have raised $12.42 billion, compared with 148 deals valued
at $10.84 billion for the same period in 1998, reported CommScan, a New
York-based investment banking research firm.
Signs of life were quickly visible Tuesday when commercial Web site
developer Proxicom (PXCM) opened at 18 3/4 after the company priced 4.5 million
shares at $13 each through underwriters led by BT Alex. Brown. The stock hit 23
1/4 and closed Friday at 19. Price talk was $13 to $14 a share, up from the
originally filed range of $10 to $12 a share.
Proxicom, of Reston, Va., is a developer of electronic commerce sites on the
Internet for Global 1000 companies and other large organizations. It has focused
exclusively on the Internet since 1994 and has completed more than 600 projects.
Proxicom now has ongoing projects with about 150 companies.
Major customers include Cox Interactive Media, Owens Corning, American
Electronics Association, Hoffman-La Roche, Merrill Lynch, Aramco Services,
Kemper Insurance, Gap, Hewlett-Packard, Ritz Camera Centers, Excite, Marriott
International and Ziff-Davis.
Competitors include large systems integrators such as IBM, Andersen
Consulting and Computer Sciences; specialty systems integrators, including
Cambridge Technology Partners and Sapient; strategy consulting firms, including
McKinsey and Boston Consulting; Internet professional services providers such as
USWeb/CKS, Viant and Scient and IXL Enterprises; and new entrants to the field,
including Agency.com and Modem Media.PoppeTyson.
Internet Financial Services (IFSX), a provider of online brokerage services
and market information, opened at 12 15/16 Tuesday after it price
d two million shares at $7 each via Whale Securities. The stock hit a high of 20
1/4 and closed Friday at 17 3/8.
Investors who looked past the glitz of Internet stocks found a tasty morsel
in a themed restaurant company with experienced management.
Buca (BUCA) opened Wednesday at 15 3/16 after the company priced 3.75
million shares at $12 each through underwriters led by US Bancorp Piper Jaffray.
The stock reached 20 1/4 and closed Friday at 18 1/8. The company had filed to
offer 2.77 million shares at $10.50 to $12.50 each.
Buca operates 20 full-service, dinner-only Buca di Beppo Italian restaurants
in major cities across the nation and upscale suburbs. The company expanded to
19 restaurants at the end of fiscal 1998 from 11 a year earlier and plans to
open another 13 restaurants in fiscal 1999. Restaurants range is size from 4,500
to 10,000 square feet and seat 170 to 350 people.
The company attempts to create an "energetic atmosphere that parodies the
decor and ambiance of post-war Italian/American restaurants" with extensive use
of "hundreds of vintage photos and icons of Italian heritage" and "lively music
from classic artists such as Frank Sinatra and Dean Martin." The company says
the idea is to "irreverently exaggerate the cliches of post-war Italian/American
restaurants found in Italian neighborhoods of large US cities."
A discount retailer with profits looks like a good buy in a market dominated
by speculative Internet stocks.
On Thursday, discount retailer Tuesday Morning (TUES) opened at 15 1/16
after the company priced 6.6 million shares, including 1.085 million shares by
current shareholders, at $15 each through underwriters led by Merrill Lynch. The
stock hit 17 1/2 and closed Friday at 17 1/4.
Tuesday Morning purchases first-quality, brand-name merchandise at closeout
and typically sells at prices 50% to 80% less than those charged by department
stores and specialty retailers.
The company opened its first store in 1974 and now operates 354 stores in 36
states. It added 29 stores in 1997, 32 stores in 1998, 7 stores this year and
plans to open at least another 28 stores this year with another 40 stores next
year.
Tuesday Morning attempts to distinguish itself from other retailers with
what it calls an "event-based" selling strategy. By closing stores to restock
and reopening with fanfare, it creates the equivalent of 7 "grand openings" a
year. Products are available in limited quantities, and stocks are generally not
replenished during the sale.
Earlier this month, the company said first-quarter same-store sales rose
13.1% and total sales for the period rose 22% to $71.8 million. For the year
ended Dec 31, Tuesday Morning reported net income of $13.2 million on net sales
of $396.1 million, compared with a loss of $3.6 million on sales of $327.3
million in 1997 and net income of $11.5 million on sales of $256.8 million in
1996.
As if further proof were needed that the IPO market had quickly regained its
taste for Internet stocks, a small company from a small underwriter went over
big.
Log On America (LOAX) rode the Internet wave Thursday and nearly tripled its
offering price on the opening. The stock opened at 29 11/16 after the Internet
access provider in the Northeast priced 2.2 million shares at $10 each via Dirks
& Co. The stock climbed to 37 and closed Friday at 28 15/16.
Some believe the stock is a case of "insanity.com." When a small company
brought to market by a small underwriter explodes, some analysts believe the
action suggests the market's speculative bubble is about to burst.
In an effort to expand service, Log On America has been approved as a
competitive local exchange carrier in Rhode Island and it plans to provide a
full range of local telecommunications services, including Internet, voice, date
and cable programming.
The company has limited revenues and has not yet shown a profit. On Dec 31,
1998, it had an accumulated deficit of about $422,053. The company began
operations in 1992, but didn't produce significant revenues until 1996. The
limited operating history makes it difficult to evaluate the company's
prospects.
On Friday, the star of the week arrived.
Net Perceptions (NETP) led Friday's charge, more than doubled its offering
price on the opening and underscoring the continuing strength of software tools
in the booming Internet market.
The stock opened at 33 7/8 after the company priced 3.65 million shares at
$14 each through underwriters led by BancBoston Robertson Stephens. The stock
hit 35 and closed at 29 13/16. Price talk was $10 to $12 a share.
The Minneapolis-based company develops software designed to allow Internet
retailers to market to customers on a one-to-one basis as the transaction is in
progress. With basic customer information on file, the software allows the
e-marketer to adjust messages and product offerings to individual tastes. The
goal is to boost sales and to build customer loyalty by personalizing each visit
to the Web site.
Customers include Barnesandnoble.com, Bid.com, Billboard TalentNet, CDnow,
Egghead.com, iVillage, Preview Travel, Ticketmaster Online, Value America and
Wherehouse.com. Value America and iVillage recently launched hot IPOs.
Net Perceptions competes with Personify, the LikeMinds division of
Andromedia and the Aptex division of HNC Software. Microsoft's recent
acquisition of FireFly Network, a developer of collaborative filtering
technology, suggests the software giant sees opportunity in the field.
Launch Media (LAUN), a digital-media company providing new music downloads,
entertainment news and CD sales, also rocketed to a successful IPO. The stock
opened Friday at 32 3/4 after the Santa Monica, Calif.-based company priced 3.5
million shares at $22 each through underwriters led by Hambrecht & Quist. The
stock reached 36 11/16 and closed at
28 3/8. Price talk was increased to $18 to $20 from $12 to $14.
The company's site, www.launch.com, focuses on new artists, but also carries
music from established names. Publicly traded comparable companies include
AudioHighway.com, CDNow and Broadcast.com.
A few deals were hardly noticed.
AremisSoft (AREM), a London, developer of enterprise software for mid-sized
companies, priced 3.8 million shares at $5 each via Cruttenden Roth. The stock
opened Thursday at 5 1/4, edged up to 6 and closed Friday at 5 3/32.
CompuCredit (CCRT), a provider of credit services to people with past credit
problems, was credited with a good IPO. The Altanta-based company priced five
million shares at $12 each via PaineWebber. The stock opened Friday at 12 5/8,
hit 16 and closed at 14 3/8.
The ship didn't come in for Statia Terminals Group (STNV), one of the five
largest marine terminal companies in the world. The Netherlands Antilles-based
company priced 7.6 million shares at $20 each via Bear Stearns. Trading opened
Friday at 19 3/4, edged up to 20 and closed at 18 3/8. End
Bridge News, Tel: (212) 372-7122
Send comments to: equity@bridge.com
[symbols:US;NETP:US;LAUN:US;CCRT:US;STNV:US;AREM:US;LOAX:US;
TUES:US;BUCA:US;IFSX
US;PXCM]
Apr-23-1999 14:19 GMT
Symbols:
US;NETP US;LAUN US;CCRT US;STNV US;AREM US;LOAX US;TUES US;BUCA
US;IFSX US;PXCM
Source [B] BridgeNews Global Markets
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