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News > Technology
StarMedia IPO keeps rising
May 28, 1999: 3:22 p.m. ET

Amid a so-so week for IPOs, shares of LatAm ISP are bucking the trend
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NEW YORK (CNNfn) - While it's been a rather so-so week on the Internet IPO scene, one of the few winners is StarMedia Network Inc., a Web company that's put investors' interest for online Latin America clearly in focus.
     The stock's successful debut this week shows the close attention investors are paying to the potential of companies targeting Spanish speakers on the Net, analysts say. And they say more such ventures are likely on the way given StarMedia's success thus far.
     Another Spanish-language service, Quepasa.com Inc. filed in March for an initial public offering, while other Spanish-language Internet content providers, including eHOLA - a wholly owned subsidiary of Global Datatel Inc. (GDS), and Ole!, are strengthening their presence on the Web.
    
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The logo of the Que Pasa network.

     StarMedia (STRM), an online service for speakers of Spanish and Portuguese, surged nearly 74 percent to 26-1/16 in its first day of trading Wednesday. It has been climbing steadily, trading up 14-7/16 at 59-15/16 Friday afternoon. The stock was trading as high as 64-3/4 at one point Friday.
     "StarMedia is the behemoth south of the border," said Gail Bronson, an analyst at IPO Monitor. "I keep hearing the media hype that they're the other AOL."
    
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Performance of StarMedia shares since debuting Wednesday

     Many investors who are snatching up shares of StarMedia may be looking down the road at the company's appeal as a takeover target, said Charles Kaplan, an IPO analyst with Equity Analytics.
     "They're creating the brand in Latin America," he said.
     StarMedia is "the equivalent in concept --though not in practice -- to AOL," he said. That "makes them one helluva of buyout target for an AOL, for a Yahoo!, for a Microsoft."
     Kaplan said the company, founded in 1996 in Connecticut, has been particularly good at promoting its brand name. It has offices throughout Latin America, with its core markets in Argentina, Brazil, Colombia, Mexico, Chile and Venezuela.
     The company also is promoting itself to Spanish and Portuguese speakers in the United States. In New York, for example, it has been advertising heavily with posters plastered all over the subway system. The company said it has grown from 7 million page views in December 1997 to approximately 60 million in March 1999.
     But Kaplan said that even with the injection of cash the IPO will provide, the company still needs to pump millions into infrastructure. And it has special problems in that the technological infrastructure it is working with in Latin America is far behind that in the United States, he said.
     StarMedia already has been investing heavily in itself and like many other Internet companies, it is losing money and expects to continue to be in the red for a while. The company posted a net loss of about $50 million in 1998 on revenue of about $5.3 million.
     StarMedia's initial success on Wall Street comes as the Internet IPO market has struggled, with tech stocks across the board hit by investor unease over the sector and fears of the effects of a possible interest rate hike. The highly anticipated debut of Barnesandnoble.com (BNBN) has not been a best-seller, with shares down 1-3/16 at 22 13/16 Friday, compared with its opening price of 18 Tuesday.
     Investors also were little interested in shares of two other new Web-related issues this week. Internet service provider Juno Online Services Inc. (JWEB) was trading at 12-1/16, from their offering price of 13, while Edgar Online Inc (EDGR), which provides Securities and Exchange Commission filings on the Internet, were down 5/16 at 9, compared to an offering price of 9.50.
     The only other IPO to be declared a success this week has been DLJdirect (DIR), the online unit of investment bank Donaldson, Lufkin & Jenrette. Shares were trading up 4-1/16 at 42-1/16, up from their opening price of 20 Wednesday.
     As for the StarMedia debut, Kaplan warns investors to be cautious. Many Internet IPOs that have skyrocketed, such as last week's debut of online toyseller eToys Inc. (ETYS), which started at 43-1/2 and soared as high as 85, then sank. The stock was trading Friday at 52-5/8
     "They went counter to the trend this week," Kaplan said of Starmedia. But "I'm always a little skeptical of these things. This is retail driven. Institutions aren't going in and paying $60 a share for this stuff." Back to top
     -- by staff writer Martha Slud

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