|
IPOs face discounted market
|
 |
August 10, 1998: 11:38 a.m. ET
Last week's poor IPO performances inspire skepticism and markdowns
|
NEW YORK (CNNfn) - As the broader market veered off course last week, IPOs took the brunt of investor discomfort. Of the prospective new listings, five were postponed, one withdrawn, and those that did brave the mercurial market received a double whammy of sorts.
First, there were no takers at filing range prices, leading underwriters to offer steep discounts or scale back the number of shares offered just to get the deals out the door.
But even as marked-down goods, these IPOs were pummeled, with the average performance of last week's deals declining by 3.8 percent. That's a far cry from the mid-to-high 20 percent weekly returns earlier this year.
And in another sign of IPO-phobia, 60 percent of this year's IPOs now are trading below their filing range.
"There's a lot of skepticism out there," said Marc Klee of the John Hancock Mutual Funds, Global Technology Fund. "And I believe the better known IPOs, such as Broadcast.com (BCST) and Inktomi (INKT), still have some room to fall before they look attractive."
But Klee hastened to point out that "environments like this, where there's a lot less interest, allow for more reasonable prices." Indeed, that could be just the comforting advice to lure hesitant investors into this week's deals.
Calling all Internet investors
GeoCities, a pioneer in allowing Internet users to create their own personal Web sites, is set to price 4.7 million shares at $12 to $14. Such personal sites, or "homesteads," have ballooned from a mere 10,000 three years ago to about 2.1 million today.
The company has mapped out a formula for keeping users riveted to its pages, which is what Web advertisers look for, and encourages its homesteaders to continually upgrade their sites and interact with other users.
Ranked the third most heavily trafficked site in June by Media Metrix, GeoCities has attracted 161 advertising customers, including IBM (IBM), Acura, Microsoft (MSFT) and Egghead, Inc. (EGGS). But 10 percent of GeoCities' ad revenue comes from Egghead and 90 percent of total revenues come from advertising.
Too much dependency on one client and one revenue source is obviously scary and is one caveat to consider. Not to mention, Web advertising is an emerging and evolving market. One disappointing piece of news about the business could send Internet stocks tumbling.
After its pricing, GeoCities will have a stock value of nearly $400 million. Revenues for the first six months of this year were $5.5 million and accumulated losses currently amount to $19.7 million.
Also pursuing the Internet IPO investor is this week's other Net deal: Citysearch.com. Its Web pages act as local city guides for 13 metropolitan areas in the United States as well as Melbourne, Sydney and Toronto internationally.
The company is expected to raise $48 million by offering 4 million shares at $11 to $13 per share, giving it a potential market cap of a quarter of a billion dollars.
Revenues have grown from $203,000 two years ago to $5.3 million in the first six months of this year. A substantial portion comes from sales of Web sites to local businesses. Its accumulated deficit, however, is over $67 million.
Comprehensive, up-to-date information and ease of use are pluses for this site, but competition is cutthroat. In addition to the traditional search engines, Microsoft, AOL and even SBC Communications also provide city-guide features.
Share a ride on the profit shuttle
SuperShuttle International will price 3.3 million shares at $8 to $10 apiece. With a fleet of about 800 vans, SuperShuttle provides door-to-door, shared-ride service to 18 airports in 15 cities. The strategy here: acquire competitors and build up a nationwide brand name that can compete with local limousine, bus, taxi or van services.
But even if the company doesn't gain market share that way, the pie is growing as the number of airline passengers is expected to grow from fewer than 600 million three years ago to 928 million by 2007.
Is there static on the line?
U.S. Online Communications, a provider of cable and phone services to multifamily dwellings, is expected to price 3 million shares at $8 to $10. But if Firstlink Communications is any guide, this deal may have a tough time attracting investors. Firstlink (FLCI), which also provides phone services to multifamily complexes, is down 34 percent since pricing at $5.50 on July 28th. 
-- by staff writer Bambi Francisco
|
|
|
|
|
 |
|
