A Rough Reception, And a Smooth as Silk Debut
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Silknet Software defied a slump in Internet IPO debuts Wednesday by finishing its first day of trading at $35.13, a healthy 134% increase over its offer price of $15.
But another Internet offering - a faux Internet company, to be honest - got hammered, becoming only the second 'Net IPO in 1999 to close its opening day below the offer price. (Digital Lava, on Feb. 17, was the first.)
COMPS.COM, which provides commercial real estate transaction information and market data, went out at $15 per share, only to wind up at $14.25, a 5% drop from its offer price.
Based in San Diego, COMPS.COM is a classic case of a traditional company tacking a ".com" onto its name to cash in on the hot Internet stock market. (Note to COMPS.COM: Your timing is a little off.)
Further, more than 90% of its revenue last year came from non-Internet media such as CD-ROM. My guess is one big reason this offering got slammed - besides the softening market, of course - is that COMPS.COM is at least two years behind in transitioning to the 'Net.
(Perhaps company executives took too much to heart InfoWorld columnist Robert Metcalfe's 1995 prediction that that Internet would collapse in 1996 and that "CD-ROMs through Federal Express will emerge as the information superhighway.")
One way COMPS.COM resembles a real Internet company is that it's in the red. It has an accumulated deficit of $11.6 million.
Net loss for 1998, meanwhile, was $1.66 million, a 6.6% increase over 1997's net loss of $1.56 million. That doesn't look too bad when you consider that revenue grew 18.7% in that same period (from $10.87 million to $12.9 million). But look back further and you see that the revenue growth rate is slowing: It was 24.8% from 1996 to 1997 and 29.6% from '95 to '96.
Silknet is another story altogether. The company, founded in 1995 and based in Manchester, N.H., sells Windows-based electronic commerce software that allows businesses to provide customer self-service and collect data on customers for itself and its partners.
This kind of product has applications across a wide number of industries, as reflected by Silknet's customer list, which includes 3Com, Bank of America, Cigna, Compaq, Microsoft, Office Depot and Sprint PCS.
Silknet has built up an accumulated debt of $15.4 million through March 31, but it didn't begin generating real revenue until 1998, when it had $3.65 million in sales.
And the company is ramping up fast: Total revenue for the nine-month period ended March 31 was $9.2 million, more than four times the $2.1 million for the nine-month period ended March 31, 1998.
The contrast between these two offerings is obvious, and on Wednesday investors made it clear that have greater faith in Silknet's upside potential. In the long run, this kind of investor discrimination is healthy for the Internet stock market.
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