The handful of Internet initial public offers that debuted so far this year trade at 57% of the highs, putting the ‘ouch factor’ in buying a new issue at the open price as many newbie investors often do on the first-day frenzy factor. Internet.com’s IPODEX shows the group the six stocks trade between 32% to 83% of their highs, with Healtheon (NASDAQ:HLTH) holding onto most of its value so far.
Our more in-depth look at Healtheon can be found by clicking here. The short take is this: healthcare, doctors, insurance groups, HMOs, PPOs and the other acronym-laden healthcare system is in need of serious repair. Healtheon can be part of the solution but it’s quite a solution to tackle.
| Company | Stock | 11-Feb | 18-Feb | Percent | 2/18 share price |
| name | Symbol | close | close | change | % of high |
| Prodigy | PRGY | $ 28.13 | $ 39.56 | 41% | 78% |
| Allaire | ALLR | $ 47.75 | $ 52.63 | 10% | 76% |
| Healtheon | HLTH | $ 31.38 | $ 29.25 | -7% | 83% |
| MarketWatch | MKTW | $ 72.00 | $ 59.31 | -18% | 46% |
| Pacific Internet | PCNTF | $ 35.00 | $ 28.13 | -20% | 32% |
| Verticalnet | VERT | $ 45.38 | $ 35.00 | -23% | 63% |
| TOTAL | 259.63 | 243.88 | -6% | 57% | |
| AVERAGE | 43.27 | 40.65 | -6% | 57% |
In the past week only two of the six IPOs gained, with Prodigy (NASDAQ:PRGY) continuing on a tear, up 41%. For the nine months ended 9/30/98, total revenues remained flat at $101.5 million. Annualized, Prodigy’s revenue falls between that of rival ISPs Earthlink (NASDAQ:ELNK) and Mindspring (NASDAQ:MSPG).
Yet PRGY trades in line with MSPG despite Mindspring’s completion of its NETCOM buy that gives it nearly 1 million total subscribers, more than double Prodigy. Mindspring is also profitable while Prodigy and Earthlink are not.
While we’re on ISPs, not all found favor. New IPO Pacific Internet (NASDAQ:PCNTF) shares were off 20% to $28.125 per share the past week and traded at 32% of their high. No news on PCNTF but evidence of the caveat emptor method of investing we recommend.
Web site software wizard outfit Allaire(NASDAQ:ALLR) was the only other IPODEX gainer, up 10% since February 11. Allaire moved on a “buy” tout from Dain Rauscher that the Street seemed to listen to over NB Montgomery’s”hold” recommendation.
VerticalNet (NASDAQ:VERT) was the worst performer of the six shown, off 23% to $35 per share. We looked over VERT’s filings and business strategy and concluded two things: the basic notion may be good, to provide trade info to niche industries such as meatandpoultry.com.
The other side of VerticalNet is how many meat and poultry or vegetable and fruit (and the dozen or so more it serves) industries will use VerticalNet’s offering to generate it some breadandbutter.mon? My Yahoo, My Excite, My Lycos, NewsEdge (NASDAQ:NEWZ) all can deliver customized news on topics that any user picks. VerticalNet has a chance to hit it big in our opinion but seems like a long shot to us.
On deck there’s a few notable Internet IPOs:Marimba and eToys. Marimba is the firm that gained notoriety in 1996 on the media blitz of founder Kim Polese. Its business was associated with the short-lived “push” phenom before the media got tired of push and shoved it aside.
Those days are long gone as Marimba now calls itself an Internet-based software management solution company. Its main product is Castanet, software that allows corporations to distribute, update and manage applications and related data over corporate intranets, extranets and the Internet.
No matter what the word de jour is, push or not, Marimba generated $17 million revenue in 1998, so they’re doing something right. 81.4% came from software licensing and the rest from services. Significant investors include Kleiner Perkins and Compaq. We think rival BackWeb’s IPO can’t be far off if Marimba is on tap.
eToys, meanwhile, wants to raise $115 million in proceeds in its planned IPO. That amount is more than double the average amount raised by the six IPOs in IPODEX. Only Prodigy went to that level, raising $120 million.
eToys was an idealab hatched effort that has made what we think are significant revenue numbers–nearly all of it inthe December quarter–some $22.9 million in the quarter thanks to Christmas. Key to eToys success so far is its presence on AOL and its aggressive holiday TV campaign.
While we think the e-tail space may begetting fiercely competitive with wholesalers, at cost deals and others, we think if eToys can outmarket and outlast ToysRUs that it could be one of idealab’s biggest hits yet. More analysis as these two file more specific documents (neither shows IPO price, range or pro forma numbers) and they progress through the IPO pipeline.
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