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Salon IPO no page-turner
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June 22, 1999: 5:36 p.m. ET
Webzine sheds nearly 5 percent in debut; 'open IPO' doesn't impress
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NEW YORK (CNNfn) - Salon.com, the online cultural and political magazine, proved an uninteresting read on Wall Street Tuesday as traders peeled nearly 5 percent off the company's initial offering price.
The San Francisco-based company closed down 1/2 to 10 on its first day of trading as more than 2.6 million shares changed hands. The company had priced 2.5 million shares at $10.50 per share, the bottom end of its expected range.
Salon (SALN) made its offering through W.R. Hambrecht & Co.'s "OpenIPO" -- or "Dutch auction" -- format, designed to give individual investors more power to set the price of initial public offerings.
Despite the company's tepid debut, industry watchers and syndicate managers said it was still too early for a verdict on the new auction-style system.
"I wouldn't expect a Dutch auction IPO to skyrocket upon debut since the entire point of (the Dutch auction) is to find an equilibrium price," said Catherine Skelly, an analyst at Bluestone Capital Partners. "A moonshot would imply that they left money on the table and that is what (HR Hambrecht) is trying to avoid."
Still, Salon's IPO has come under fire recently by some analysts because of the company's precarious financial position.
Salon garnered just $2.9 million in revenue in fiscal 1999, mostly from advertising. Furthermore, 16 percent of its ad revenue came from barter deals under which Salon accepts ads on its site in exchange for placing its own ads elsewhere.
Although these barter deals are counted as ad revenue, Salon doesn't receive any cash.
Michael O'Donnell, Salon's president and CEO, defended his company's financial position on CNNfn.
"We've been stretching out our dollars much farther than most Internet companies," he said. "We spent only $12 million in the last four years. That pales in comparison to a lot of other companies in our space."
The four-year-old Webzine made a splash last September when, during the height of the Monica Lewinsky scandal, it disclosed an adulterous affair by Republican Congressman Henry Hyde.
About 1.3 million people visit Salon each month, and the site boasts a roster of such prominent writers as Camille Paglia and Garrison Keillor.
Salon raised $26.3 million in the offering of 2.5 million shares. The company will use the proceeds to hire more staff, add more online community features to keep readers on its site, and pursue more advertising deals.
-- from staff and wires reports
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