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RealTime IT News

Greedy to the Bone

di•vine (di-vin')

1. Heavenly; perfect.

Any idea where I'm going with this one? If not, let me be frank. There's an IPO offering in the pipeline that's overstayed its welcome. So, I'm giving my two cents and spreading the word on this slight of hand. You'd do better to hit the track and bet the ponies than give a second thought to investing in the so-called B2B incubator divine interVentures.

Decked out in his signature ponytail and diamond stud earring, the company's skipper, Flip Filipowski, is the millionaire mogul who sold his PLATINUM technology software firm to Computer Associates last year for $3.6 billion. With a $300 million piece of the pie and a non-compete hanging around his neck, Flip decided to head into the incubator business.

Divine has 52 companies hurriedly stuffed into its portfolio, in preparation for its own whirlwind IPO. But there's nary a one that you or I have ever heard of, and barely half have made a nickel to date. In a crowded field of me-too incubators, divine has one of the least impressive stable of sibling companies. In addition, the firm posted a paltry $5 million in revenue for the first quarter of this year, on bleeding losses of $77 million. But neither shortcoming has been able to slow the incubator from reaching for the moon with its bloated and underwhelming IPO.

In theory, divine interVentures plans to cash in its chips by spinning off incubatees into lucrative public offerings. However, investors are unlikely to greet this group of no-names warmly, when their parent holding company can hardly get its own house in order, let alone get its own IPO out of the nest.

CS First Boston was tentatively scheduled to handle this IPO, but divine canned the underwriter when Credit Suisse recommended holding off until fall. Wasting no time in search of a second opinion, divine tapped Robertson Stephens to serve as master of ceremonies. Despite the nastiest market correction Net stocks had ever laid eyes on, the incubator wouldn't take no for an answer.

The company had originally dog-eared a staggering $350 million public offering, planning to float 50 million shares between $6 and $8 a pop. Folks, that's a truckload of funny money by any measure for a newcomer that has yet to bear any fruit. With little investor interest, divine trimmed its shares to 20 million, and still with no takers, lowered the number of shares yet again to 14 million. All the while, the company bumped its price range higher to help offset the slash-and-burn.

First climbing to $13 to $15 apiece, the pricing finally settled at a more modest $9 to $10. But there's more than 100 million reasons why divine was so careful to balance the offering size, and so anxious to get into bed with an underwriter who would force this IPO on apathetic investors. Investor interest or not, divine has numerous commitments from blue-chip backers, that if the incubator completes a minimum $120 million offering before the end of July, it stands to receive well over $100 million in private placements directly following its IPO.

So as you can see, it's a simple matter of economics at the expense of retail investors. Now that the firm has postponed its IPO for the third time, expect to see some ridiculous eleventh hour juggling by both divine and Robertson Stephens to get this offering into the new issues market - and fast. Flip is under a tremendous amount of pressure to produce a winner in divine. With nearly a half billion dollars worth of private investors' money already invested in the incubator, a shelved IPO could be one of the costliest train-wrecks we've seen in a while. Because by midnight August 1st, this incubator turns back into a pumpkin.

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