August's Internet IPO Freeze
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I keep reading elsewhere about the stirring comeback of the IPO market. Either these sources are talking about biotechs or they're actually testing new drugs for those companies, because the market for Internet public offerings is colder than ever.
The numbers tell the story quite vividly. For starters, only a dozen 'Net stocks debuted in August, almost exactly the same amount we saw in April, June and July.
But the most telling figure is the average first-day return: At 14%, August easily was the worst month for Internet IPOs both this year and last. The distant runner-up is last April's 31% average first-day gain.
Four of the 12 Internet stocks launched in August finished below water on their respective first days of trading, and all four managed to crack the list of 10 worst 'Net debuts this year.
, a California-based access provider for companies operating in the Asian and Pacific markets. With a drop of 27% on Aug. 3, IAWK now tops this year's list of first-day losers. Things haven't gotten much better in ensuing weeks. iAsiaWorks shares closed Wednesday at $10.06, or 23% below the $13 offer price.
Two other 'Net tickers (see chart below) broke even in their initial trading sessions, while only one - Evolve Software- had what could be defined as a moonshot, as it doubled in price on its first day on the Nasdaq, closing at $18. (Shares finished Wednesday at $19.38.)
Even America Online'smuch-hyped international entry, America Online Latin America, barely gained in its Aug. 8 debut, finishing up 44 cents, or 6%. Since then, shares haven't strayed far from the $8 offer price. Hola, AOLA!
Will the Internet IPO market heat up as the weather turns colder? Well, it can't get any worse than August, but that doesn't mean it will get much better. Sure, there's a backlog of 'Net companies waiting to go public, but a glut of offerings will only ensure a greater number of fair-to-middling openers, because Internet investors likely won't get sucked into more IPO madness anytime soon. They flew too close to the sun once already, and the descent - to quote 17th-century political philosopher Thomas Hobbes - was nasty, brutish and short. Hobbes must have been a day trader.
Month This year 1999 January 5 4 February 27 11 March 27 13 April 13 17 May 6 26 June 11 32 July 13 35 August 12 26 Total 114 164
Average First-Day Return (By Month)
Month This Year 1999 January 160% 241% February 126% 122% March 99% 134% April 31% 116% May 38% 59% June 41% 116% July 63% 74% August 14% 45%
10 Best Internet Debuts of 2000
Company IPO Date Gain webMethods Feb. 11 508% Crayfish March 8 414% Selectica March 10 371%