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RealTime IT News

Many Internet Companies Drained From IPO Pipeline

Back in late May I wrote that we could see more Internet companies bail out of planned IPOs because a glut of offerings and a downturn in 'Net stock prices was hurting first-day performance.

While the Internet IPO pipeline may not have thinned - companies just keep on filing those S-1s, and each month brings a new record for 'Net IPOs - the number of firms postponing or withdrawing their initial public offerings has grown six-fold since May.

Through the end of that month, only two Internet firms, WebMD and musicmaker.com, had changed plans regarding their IPOs. (Online healthcare information and services provider WebMD, of course, merged with Healtheon, while Internet music e-tailer musicmaker.com revived its IPO bid, going public on July 7.)

In the past two months, though, at least 10 Internet companies have refused to make the jump. A number of these delays have come in the last few days alone, and include GreatFood.com, HealthGate Data, Women.com Networks, FTD.com, Medscape, Interactive Intelligence and Webstakes.com.

This trend is no surprise, since Internet IPOs have fared even worse in the current slump than they did during the spring correction. The vast majority of Internet IPOs in August have ended their first-day of trading near or even below their respective offer prices. Rather than be part of the carnage, an increasing amount of companies would rather live to launch another day (preferably last March).

The strangest case is HealthGate, an online health information source that filed to go public nearly four months ago and has been expected to make its Wall Street debut since early July. (I even recall that the company and underwriter SG Cowen priced shares back then, but I can't find evidence of it anywhere.)

Dow Jones News Service reported Saturday HealthGate has postponed the offering of 4.6 million shares at $10 to $12 each, yet HGAT shares are listed on at least one online IPO calendar to debut during the week of Sept. 6. I'll believe it when I see it.

Webstakes.com, meanwhile, got cold feet faster than the others. The online sweepstakes promoter filed on June 14 to sell 3.6 million shares at $13 to $15 before postponing its IPO last week. The company had planned to raise $50.1 million with the offering. Now it appears Webstakes.com will rely on the $40 million private investment it received in the spring from Excite@Home, XL Ventures and 10 other funding sources.

Like musicmaker.com, many of the companies are merely delaying their offerings, hoping to ride a surge in Internet stocks. That may come in the fall, but the glut shows no sign of easing up. As long as 25 or more Internet companies go public each month -- as has been the case since May -- triple-digit debuts will continue to be the exception rather than the rule.

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