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A flat open for Sohu.com
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July 12, 2000: 5:05 p.m. ET
Chinese Net portal fails to draw investors; divine IPO falls below offer price
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NEW YORK (CNNfn) - A lukewarm new issues market continued to take its toll on initial public offerings as two deals produced dismal results.
Chinese Internet portal Sohu.com Inc. could only muster modest gains before closing unchanged while the much-anticipated issue of Internet incubator divine interVentures Inv. fell below its offer price.
Sohu.com finished its first day of trading flat at 13. The company raised $59.8 million after pricing 4.6 million shares at $13 each, below its expected range, through underwriters led by Credit Suisse First Boston, however underwriters were forced to cut the price range to $13-$16 from the original $16-$19 range.
"Investors have shied away from international portals," said Patrick Wong, senior investment analyst with Internet investment firm Zero Gravity Internet Group (www.e-harmon.com). "Definitely there is a good upside going forward. But there is just uncertainty now."
Beijing-based Sohu.com (SOHU: Research, Estimates) is an Internet portal that consists of 12 content channels, Chinese language Web navigation and search capabilities, and e-commerce services. Sohu.com averaged more than 16.3 million page views a day during June and had over 3.1 million registered e-mail users, the company said in a filing with the Securities and Exchange Commission.
Sohu.com follows the dismal performance of Netease.com (NTES: Research, Estimates). On June 30, Netease.com, a Chinese language Web portal in China, fell 2-7/8, or 19 percent, to 12-1/8.
Sohu.com was founded in 1996 as Internet Technologies China Inc. and became Sohu.com with its relaunch in February 1998. Sohu.com also offers free Chinese language e-mail, online bulletin boards, chat rooms and instant messaging. The Beijing firm began venturing into e-commerce services in 1999 on a trial basis.
Sohu.com plans to use proceeds for capital expenditures, sales and marketing, and general corporate purposes.
For the three months ended March 31, Sohu.com reported a net loss of $2.5 million on revenue of $842,000 compared with a net loss of $276,000 on revenue of $233,000 a year earlier.
While the Internet market in China is behind that in the United States, competitors in China include such U.S. companies as Yahoo!. Sohu.com also may face competition from affiliates of America Online and Softbank Corp.
In 1999, advertising customers include Intel, Motorola, Nokia and NBCi/Snap.
Divine not so blessed
The much-anticipated offer from Net incubator divine interVentures finally began trading Wednesday but produced lackluster results. Divine fell 7/32 to 8-25/32 after raising $128.6 million. The company priced 14.285 million shares at $9 each through underwriters led by Robertson Stephens.
Lisle, Ill.-based divine interVentures (DVIN: Research, Estimates) offers such services as Web hosting and design to about 52 business-to-business e-commerce companies, primarily infrastructure providers and market makers. The company generates revenue through its majority-owned associated companies.
Divine hit many bumps on the road to its IPO, in registration since December. The company fired its original underwriters, Credit Suisse First Boston, and then delayed the deal several times.
Run by well-known entrepreneur Andrew "Flip" Filipowski, the company took a risk opening Wednesday, Zero Gravity's Wong said.
"They've had a lot of bad press in the IPO process and that started when they changed bankers," he said.
Credit Suisse told divine to wait on its IPO, but the company chose to proceed because of capital needs, Wong said. The company needed to go public before the end of July or it would have missed investment deadlines from Microsoft and other investors, he said.
"The upside is that they have a very interesting investor base and are located in Chicago, which has less competition," Wong said.
Formed in May 1999, the company has a short track record but has generated big losses. Divine reported a net loss of $44.2 million on revenue of $5.2 million for the quarter ended March 31, compared with a loss of $9.4 million on revenue of $1 million the previous quarter.
Divine plans to use proceeds to repay promissory notes, purchase a property in Chicago for a planned 400,000 square foot facility, buy Microsoft products and services, and for general corporate and working capital purposes.
Divine competes with such firms as CMGI, Internet Capital Group, Safeguard Scientifics, idealab!, vcapital.com and Garage.com.
After the IPO, divine CEO Filipowski will own a 6.9 percent stake, Dell USA will hold 14.8 percent, and Microsoft Corp. will have 6.9 percent.
Divine is trading under the temporary symbol TEMPV and will trade under DVIN beginning Thursday, underwriters said. 
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divine interVentures
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