RealTime IT News

IPO Tracker: Pre-Vacation Blues

It was bad to be an IPO last week. For the most part, investors were really not interested. Vacations seem to be the only thing on investors' minds.

In fact, there was some awful punishment of IPOs. Take Avistar Communications . Rather, it was equivalent to a burning star.

The lead underwriter, Chase H&Q, set a price range of $13-$15. Well, when it came time for the IPO, the offering price was $12. The company raised a paltry $36 million. But it gets worse. The company is required to use $12.5 million of these proceeds to pay off the debts for the three founders.

The stock opened up a fraction and then went into a tailspin. By the end of trading, the stock was at $9.38. By Friday, the stock was $8.63 (the stock was as low as $7.81). The market cap is $217 million.

Avistar develops technology systems to integrate video and data collaboration over corporate enterprises and the Net. The biggest customer (accounting for 43 percent of sales in 1999) is Chase Manhattan, which is the parent company of Avistars lead underwriter, Chase H&Q. Then there is UBS Warburg, which accounted for 23 percent of sales in 1999. This investment bank is the parent of Warburg Dillon Read, which is a co-manager of the Avistar IPO.

Of course, Avistar faces extreme competition. Competitors include such heavyweights as VTEL and Polycom.

In light of all this, it is probably a good idea to avoid Avistar - even though the stock price is quite low.

But there were some bright spots last week. Last Friday Peco II had its IPO. The price range was $14-$16 and the offering price was set at $15. At the close of trading, the stock hit $23.

No doubt, the company is solid. It is a leading developer of power systems focusing on the red hot communications sector. For the first six months of 2000, sales were $74.2 million, which was up 101.9 percent from the same period last year. Net income was $9.8 million. Customers include Lucent, Verizon, and Sprint.

The stock may come down a bit, especially in the next few weeks. But long-term, the company has much upside potential.