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eMailbag Monday: LinuxOne, Insweb, Green Shoe

Monday eMailbag: LinuxOne, Insweb, Green Shoe

LinuxOne should be going public soon. What do you think of the company?

Reply: I've written a few articles on the subject of Linux - and they have, by far, generated the most interesting (and heated) emails.

Okay, here I go again. In a word, my opinion on LinuxOne is: No.

Revenues? Zero (the company was started in March of this year). The site? Well, it's OK. Also, the company is planning to raise a small amount of money (about $25 million), which is paltry compared to RedHat and VA Linux.

However, I would not be surprised if LinuxOne had a nice pop on the first day - given the fact that Linux is red hot. But for the long-term, I would stay away.

The most amusing part of the IPO is that the prospectus has many sections that are word-for-word from the RedHat prospectus. Then again, the company is using a small underwriter (Capital West Securities).

InsWeb: What's the Best Policy?

What's your take on InsWeb?

Reply: I've been a fan of InsWeb (INSW) for some time. Just like any other financial product, insurance fits the Web distribution model. Users can make price comparisons; learn about the intricacies of insurance; and so on.

InsWeb has agreements with 49 insurance companies covering auto, homeowners, renters, term, health and even pet insurance. In fact, Gomez Advisors ranked the site the No. 1 for online insurance. InsWeb also got a #1 ranking from Lafferty Information and Research Group.

InsWeb has been able to capitalize on its leadership. In the latest quarter, revenues were $7 million, which was a 39% sequential increase from the quarter before and a 457% increase from the same period a year ago.

The company should be able to increase the momemtnum, as the company has recently launched a two-year $75 million marketing campaign and signed a variety of distribution deals, such as Morningstar, ZDNet and Microsoft.

Green Shoe

I've been following IPOs lately. I've heard the word 'green shoe.' What does this mean?

Reply: In the underwriting agreement, there is a clause that is known as the overallotment provision. The less technical name is 'green shoe.' Interestingly enough, the phrase was first used with the Green Shoe Company. The clause allows the underwriter to purchase an extra amount of shares several weeks after an IPO (the amount can be as much as 15%). Typically, the underwriter will exercise this option when the stock goes above the offering price.