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Internet propels IPOs
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November 30, 1998: 9:52 a.m. ET
Market for non-digital offerings looks gloomy, especially for small caps
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NEW YORK (CNNfn) - Although the Internet might seem to have led the hibernating IPO market to a yearend rebirth, the cold numbers show that the sector has merely broken from an otherwise drowsy pack.
So far in 1998, 339 companies have gone public, posting a 6.8-percent average return equivalent to the broader market's performance.
However, there's hardly any breadth to the statistic. Excluding the stellar growth of the year's 33 Internet debuts, the class of 1998 has actually fallen nearly 5 percent in value.
Most of these issues fall within the small capitalization realm, which is still lagging the big companies for the year.
Lehman Brothers market strategist Jeffrey Applegate points out that the small caps are "precisely where you don't want to be." Because the U.S. economy is likely to slow in relation to the global economy, the small caps - as "more domestic, less predictable and less stable earners" - are likely to be the first casualties next year.
However, in the long term, small caps may well outshine the pack.
A Donaldson, Lufkin & Jenrette report, Good Things Come In Small Packages, reveals that over the last 72 years, small companies' shares posted an average annual return of 18 percent. Comparatively, the S&P 500 only gained 13 percent annually on average.
In fact, small issues have a very auspicious near-term outlook ahead, the report said.
Because small caps tend to rebound almost 50 percent immediately after the broader market bottoms out, DLJ says that small caps could rebound as much as 80 percent over a twelve month period.
Furthermore, the report indicates that the "January effect" that traditionally favors small stocks with the New Year has "pulled forward to November and December," giving the market a holiday boost.
With January expanding backward and investors wearing their traditional rose-colored cyber-goggles as far as the Internet is concerned, this week's two 'Net offerings should blast off.
Ticketmaster takes local stage
Ticketmaster-CitySearch is set to raise $80.5 million with its initial 7-million share offering, pricing between $8 to $10 a share.
The offering, led by NationsBanc Montgomery, is comparatively quite ample, giving the online event coordinator a starting market capitalization of $624 million.
While the CitySearch side of the business has many competitors from established Internet portals like Yahoo! (YHOO) or Microsoft's (MSFT) Sidewalk.com, Mark Mooradian of Jupiter Communications is positive about the company's management and ability to strike deals with local media companies.
EBay's little brother?
Online auctioneer uBid is set to price 1.58 million shares between $13 to $14. Given its limited float, the stock will likely be propelled into orbit and float around in the exclusive world of virtually unjustifiable valuations where only Internet companies need apply.
Whether uBid's IPO doubles in value about every 2-1/2 weeks as fellow Internet auction house eBay (EBAY) did is another story. eBay is profitable, while uBid doesn't expect to see any earnings any time soon.
E-Tek: The 'Net's nervous system
Goldman Sachs is taking family-owned fiber optic supplier E-Tek Dynamics public this week, offering 4 million shares at a price of $8 to $10 apiece.
Research and IPO fund boutique Renaissance Capital has made E-Tek its IPO of the week, summing up its support for companies that make the actual hardware driving computer networks.
"With the advent of the Internet as a viable medium," Renaissance said, "data and voice driven optical networks are being forced to full capacity."
Renaissance added that E-Tek in particular has addressed growth concerns because it has established itself as a "leading manufacturer of passive components for fiber optic networks . . . and it is well-managed."
Putting money in the mattress
Experimental bed- and sleep-product maker Select Comfort is scheduled to price 4 million shares between $15 to $17, with Hambrecht & Quist as lead underwriter.
One has to wonder if there would be more excitement about this deal if the company was called SelectComfort.com. 
-- by staff writer Bambi Francisco
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