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New stocks vs. Nasdaq
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October 11, 2000: 4:46 p.m. ET
Companies think twice about going public as markets continue to struggle
By Staff Writer Kim Khan
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NEW YORK (CNNfn) - Web site analytics company WebSideStory began its initial public offering road show in early September, looking to raise a modest $42 million. Now, a month and a half later, the Nasdaq composite index has fallen about 20 percent and WebSideStory has withdrawn its plans to go public.
"The Nasdaq has dropped and it's been especially tough for Internet stocks, so we just decided it would be best to hold off," said Terry Kinninger, WebSideStory chief financial officer.
The company hoped to sell 3 million shares, a small amount by most IPO standards, but the current market conditions made it difficult to find demand at a suitable price. They also raised concerns about future share performance.
"We're not only concerned about what kind of price we get for the shares, but what the stock will do after we go out," Kinninger said. The company decided to withdraw because it doesn't expect conditions to improve in the next few months.
At the mercy of the market
IPO delays, postponements and even withdrawals like WebSideStory will become more common if the markets continue to slide. According to underwriters and analysts, only the very strong survive in a downturn.
"I think what we're seeing here is a bit of a speed bump in the number of IPOs that are actually coming out," said David McMillan, head of capital markets at Lazard Freres & Co.
 "It's the marginal deals which will be postponed," McMillan said.
Joe Hammer, managing director of capital markets at Adams, Harkness & Hill, said pricing becomes even more important for the buyer when the markets are struggling, and a lot of investors have their eye on the Nasdaq.
"People focus on the Nasdaq indices because in general they represent the kinds of companies that are coming out - younger companies," Hammer said.
To charge or to retreat
Because companies and underwriters decide on an offering's timing well in advance of the stock's debut, a sudden market downturn can throw a large wrench into the IPO's works. But the decision to officially postpone an offering is often only a last resort.
"Most companies will wait until the very last moment, even weeks, before they officially postpone," said McMillan. "It's a lot of work gearing up for a company to go public."
Companies may delay as long as they can, hoping to ride out an unreceptive market, while others may push on through because they simply need the money.
Asia Global Crossing (AGCX: Research, Estimates) ended up pricing at $7 and raising just over half what it originally intended last week, but WebSideStory didn't feel pressured to simply take what it could get from investors.
"The company just intends to go forward with its business plan," said Kinninger. "Our business model is not a high cash-burn model."
Check out CNNfn's IPO Calendar here
Still other companies may feel strong enough to go out no matter what. Consulting firm Watson Wyatt & Holdings Co. took the plunge Wednesday and managed a solid showing, rising $2.88 to $15.38 in late afternoon trading on the New York Stock Exchange.
One the main reasons Watson Wyatt (WW: Research, Estimates) went public was to offer options packages to attract top talent. Those options will naturally lose value in a bear market, but Watson Wyatt CEO John J. Haley said the company was confident about proceeding.
"Our board voted last November to go public," Haley said. "We have a long tradition of pretty open discussion and we went through several months of meetings and in mid-June well over 90 percent of the company was in favor of the IPO."
Haley said the underwriters suggested not going public in the summer, with many financial markets players on vacation, and decided instead on an October debut.
To find out where the IPO market goes from here, analysts and underwriters suggest keeping an eye on how the Nasdaq performs and realizing the fallout from a market downturn doesn't affect new issues immediately.
"The calendar is still pretty full, but the market is in a wait-and-see mode," McMillan said. 
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