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IPO hotshots falter
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August 25, 2001: 7:00 a.m. ET
No delistings have occurred this year, but many top 10 hall of famers falter
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - As expected, the economic downturn has taken its toll on initial public offerings, with even the strongest and hottest IPOs of the past three years posting significant losses.
To be sure, shares have dropped since the new issue rush of 1998 to early 2000. But the falling stock prices have caused significantly few companies to leave the Nasdaq, which requires companies to maintain a $1 share price for 30 business days.
Of the 1,088 Nasdaq IPOs since 1998, only 20 have been delisted. Some companies were acquired and many just disappeared, a Nasdaq source said.
The downturn has failed to affect many IPO this year with none delisted. Only two were asked to leave the Nasdaq in 2000. Seven were booted in 1999 and 11 failed to meet requirements in 1998.
The euphoria begins
But a more telling story comes from the "IPO hall of fame" which refers to those new issues that produced stellar first-day gains.
"At this point its should be named the IPO hall of shame," quipped editor John Fitzgibbon, of IPO Syndicate. "Most of them were Internet companies and it was the era of insanity.com."
In November 1998, Theglobe.com ushered in the era of Internet frenzy, where new issues often tripled or quadrupled on their first day of trade. Originally an online community where subscribers could send and receive e-mail, Theglobe.com (TGLO: Research, Estimates) turned in one of the top first-day performances when it surged 605.56 percent from its $9 offer price.
But times have changed and the flight from tech stocks – and anything "Web-related" – has caused shares for Theglobe.com to plummet (it now trades at 6 cents). Theglobe.com is also one of the few firms to be delisted from the Nasdaq.
The final bullet came earlier this month when the Web company announced plans to sell, shut down its Web site and fire half of its staff.
The experience of VA Linux Systems, the IPO champ, is nearly as dismal. In December 1999, when the market for new issues was boiling, shares for the tech company soared 697.50 percent. But the stock for VA Linux (LNUX: Research, Estimates) has since dropped 97 percent from their year high of $63.62, trading at around $1.60.
The company has also altered its direction. Originally VA Linux sold Linux-based hardware, software and services aiming specifically at dot.coms. But three months ago the company switched its focus and stopped selling computer hardware to concentrate instead on application software.
Still afloat
Foundry Networks Inc, which ranks third for market debuts, makes broadband switches and Internet routers. In September 1999, Foundry (FDRY: Research, Estimates) surged 525 percent. Shares have since dropped 85 percent, trading now at around $14, but at least the stock isn't in danger of delisting.
Software developer WebMethods Inc. emerged as the one of two performers from the Class of 2000 to make the "hall of fame" list when it gained 507.5 percent. The company has since reduced its work force by about 15 percent and in July reported its fiscal first-quarter loss will be 9 or 10 cents a share, wider than the estimated 2-cent-a-share loss.
Shares for WebMethods (WEBM: Research, Estimates) have also dropped 92 percent from their year high of $119.87 to around $11.
Cobalt Networks, which rose 482.4 percent, got bought out by Sun Microsystems for $2 billion last year and no longer trades separately.
The fall in ads
Financial information Web site MarketWatch.com, a competitor of CNNfn.com, also scored a strong first day in January 1999, a little after Theglobe.com's miraculous debut. MarketWatch.com soared 474 percent on its first day of trading to $97.50 from $17, making it the second-most successful IPO at that time.
But times are tough for finance news sites. Last December, Data Broadcasting Corp. sold its 34.4 percent stake to British firm Pearson PLC, the world's largest educational publisher and owner of the Financial Times. CBS also owns one-third of MarketWatch.com.
In May, MarketWatch.com laid off 15 percent of its staff due to the online advertising slump. MarketWatch (MKTW: Research, Estimates) shares have shed 80 percent in the past year.
Akamai Technologies quintupled in October 1999 when its shares rose 458.4 percent. In July, the provider of Web content delivery services, reported a second-quarter loss that was narrower than expected, as it moved toward its goal of posting positive operating earnings by next year's second quarter.
Akamai (AKAM: Research, Estimates) – which means intelligent, clever and cool in Hawaiian – isn't so hot anymore, off 94 percent from its 52-week high.
The most notorious IPO came from Tokyo-based Crayfish Co. Ltd., a provider of e-mail to small and medium-sized businesses. In March 2000, the IPO surged 422.7 percent during the height of Internet euphoria. But, like many of the other hotshots, shares have dropped 90 percent.
"Crayfish was the last of the real loony offerings," one analyst said at the time of the IPO.
Surprisingly, Crayfish (CRFH: Research, Estimates) has managed to stay afloat, safe from delisting, and is trading at $7.40. 
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