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IPOs make stellar comeback
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November 11, 1998: 2:24 p.m. ET
EarthWeb soars 300 percent; Fox Entertainment jumps on heavy volume
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NEW YORK (CNNfn) - Public offerings returned with a vengeance Wednesday, tacking on big gains just minutes into trading and continuing their winning streak throughout the day.
EarthWeb Technologies (EWBX) led the pack, opening at an impressive 41 on the Nasdaq, up 27 from its start price of 14.
In afternoon trading, the Internet company's stock was up more than 300 percent at 47-1/2, with trading volume exceeding 10 million shares.
Through its flagship Web site developer.com, New York-based EarthWeb provides online resources for information technology professionals, attracting 1.4 million users a month.
Analysts credit the recent surge in Internet stocks, especially that of online auctioneer eBay Inc., for EarthWeb's powerful performance.
San Jose, Calif.-based eBay (EBAY) impressed investors in September, when it soared more than 163 percent to 47-3/8 on its first day of trading. The Internet company's stock was trading at 119-3/8 Wednesday afternoon, down 11-1/2.
eBay's success story restored confidence in the beleaguered IPO market, paving the way for EarthWeb's striking debut.
"This is a great sign for Internet stocks and small caps," Renaissance Capital analyst Paul Bard said, admitting, however, that shares of EarthWeb are "certainly overvalued."
"But [the company] projects to really explode," Bard said, pointing out that the Internet market and its advertising revenues are climbing.
EarthWeb's market capitalization totals $106 million, with its accumulated deficit at $11.2 million. The company's 2.1-million-share offering was backed by J.P. Morgan.
The much-anticipated debut of Fox Entertainment Group Inc. (FOX) was also a smash success, opening at 24-1/2, up 2 from the set price of 22-1/2. Volume reached a tremendous 26 million shares in the first half-hour of trading.
Later in the day, the media company's stock was trading at 24-11/16 on volume of 42 million shares.
The company's recent success of its blockbuster film "Titanic" and hot television properties such as "The X-Files," "Ally McBeal" and "The Simpsons" may have played a role in the strong offering. In fact, the company, a unit of Rupert Murdoch's News Corp., Tuesday boosted its initial public offering to 124.8 million shares from 85 million amid heavy demand.
Renaissance Capital analyst Jennifer McBrien said Wednesday's stock price is likely to stick.
"This is a well-known brand. It covers so many different areas of the entertainment market: television, film, broadcasting. People know that," McBrien said, adding Fox's "products are well-liked and well-received."
Fox's market cap totals $14.2 billion on estimated sales of $7 billion and cash flow of $900 million in fiscal 1998.
Finally, Mony Group (MNY) also made a strong first impression, its shares opening at 29, up 5-1/2 from its set price of 23-1/2.
Late in the day, the company's stock was trading at 28-1/2 on volume of 6 million shares.
The company, which issued 11.3 million shares backed by Goldman Sachs, is the parent of Mutual Life Insurance Co. of New York, the nation's oldest and biggest insurer.
Renaissance capital analyst Randall Roth said the stock was still a bargain, valuing it at about $31 to $32. But he was quick to point out some potential pitfalls.
"Though it is cheap, [the company's] turnaround and operating performance are not as good as its competitors," he said.
IPO market back on track?
Wednesday's rally left some investors wondering if the IPO dearth of recent months, a consequence of persistent overseas market turmoil, may finally be coming to an end.
Analysts seemed optimistic.
The upsurge "will give a lot more confidence to investors for IPOs," Renaissance Capital's Bard said. "This is the most activity we've seen since August. Three deals in one week is a great lift for the IPO market."
"The IPO market was ready to take off," fellow analyst Roth added. "People were getting restless, starving for deals."
But analysts also warned of a slowdown in the coming months, when the holidays traditionally put a damper on new offerings.
"We'll probably see a couple more deals before the holidays and then we'll see the traditional slowdown," analyst Jennifer McBrien said.
But "come January and definitely February, the market should be rolling again," she added. 
-- by staff writer Nicole Jacoby
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