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Healthy On? Internet.com's IPO Index Off 12%

Healtheon priced its IPO range between $6 and $8 per share as the market itself seems to be undergoing its own erratic heartbeat, sweaty palms and clammy foreheads, all being banged against Wall Street's public issue pipeline.

Our analysis estimates that fully-diluted shares outstanding Healtheon may be seeking a $565 million initial public market capitalization or what we think could be 14x this year's or 10x next year's revenue.

The Web-based healthcare "platform" -- a Web-based network aimed at the healthcare industry--has 20 million warrants and options that dilute investors once exercised. Healtheon is the second "big" Internet firm that founder Jim "Netscape" Clark spun together.

Some of the risks: the space is intensely competitive and has just four customers, which include huge pharmaceuticals, that account for more than 90% of Healtheon's revenue. Prognosis: Healtheon may have to roll up as many quality healthcare sites on the Web as possible to create some "patient" interest to complement its medical industry-heavy nature, while also acquiring heavy-lifting healthcare network services. Whether Healtheon sprints or sputters its first day remains up to Wall Street's pulse.

Internet.com's IPO Index heard the beat grow fainter the past week as it lost 12% since September 24, in a "what do you do for an encore" look at some of the IPO stars.

Among the decliners: everybody's favorite commune hangout GeoCities (NASDAQ:GCTY) fell the most and hardest, down 21.5%. GCTY is just 26.5% above its IPO price August 11.

INTERNET.COM'S

Ticker

Share price

Share price

% change

% change

IPO INDEX

symbol

10/01/98

9/24/98

week

from IPO

Cyberian Outpost

COOL

$10.13

$7.81

29.6%

-43.8%

ISS Group

ISSX

$29.75

$26.75

11.2%

35.2%

Verisign

VRSN

$27.63

$27.50

0.5%

97.3%

Digital River

DRIV

$7.88

$8.13

-3.1%

-7.4%

DoubleClick

DCLK

$20.38

$22.25

-8.4%

19.9%

Inktomi

INKT

$66.94

$76.00

-11.9%

271.9%

24/7 Media

TFSM

$10.38

$11.88

-12.6%

-25.9%

CDnow

CDNW

$8.00

$9.38

-14.7%

-50.0%

ebay

EBAY

$40.00

$47.38

-15.6%

122.2%

Broadcast.com

BCST

$42.63

$50.50

-15.6%

136.8%

Exodus

EXDS

$23.06

$27.38

-15.8%

53.8%

Broadcom

BRCM

$65.75

$81.69

-19.5%

174.0%

Netgravity

NETG

$10.69

$13.50

-20.8%

18.8%

GeoCities

GCTY

$21.50

$27.38

-21.5%

26.5%

TOTAL

384.69

437.50

-12%

91%

AVERAGE

27.48

31.25

-12%

91%

(c) 1998 Mecklermedia (NASDAQ:MECK) - Internet.com

Netgravity (NASDAQ:NETG), came in with the second-worst fall, down 20.8%. While higher, and not falling as far, ad-network service DoubleClick (NASDAQ:DCLK) also seems to be in the same run space since its IPO as NETG. Both are in that 20% range from IPO price.

Cable set-top chip king Broadcom (NASDAQ:BRCM) also was found at the bottom of the bunch with a 19.5% drop from September 24. Putting the pressure on BRCM, a favorite so far with a 174% run from IPO, is a secondary offering where some of the original investors sell shares. Broadcom itself will sell 392,000 of a 3 million share secondary with Intel and Scientific-Atlanta shedding about a million shares between them.

Meanwhile, two co-founders, CEO Henry Nicholas and CTO Henry Samueli, will sell 900,000 shares or 450,000 each. News on October 1 that Scientific-Atlanta would buy chips from Broadcom for 500,000 cable set-top boxes didn't get Wall Street's attention as much as the planned secondary.

Of the top Internet.com IPO Index performers during the past week, Cyberian Outpost (NASDAQ:COOL) came in from the cold with a 29.6% jump since September 24.

The heat was courtesy of Cyberian's record revenue for its fiscal second quarter ending August 31, up 270% to $17 million vs. 2Q97. Net loss increased to $5.6 million vs. net loss of $838,000 for the same period last year.

ISS Group (NASDAQ:ISSX) announced September 28 its SAFEsuite Decisions, which automates the collection, integration, analysis and reporting of enterprise-wide security information. Both COOL and ISSX haven't been in favor in Internet stocks, so the bump up for both may have been overdue.

With the market's irregular heartbeat of late, look for the half dozen firms in the IPO "green room," to be waiting with more than bated breath to go public.

Overall, from our experience with Internet IPOs, even if they come out on the low end of pricing they're out.

That means capital and stock to go hunting with, something being private is extremely difficult to do.

Example: even though Infoseek (NASDAQ:SEEK) was the runt of the search engine litter, and last to go IPO in 1996, it went. How many of the dozens of other search engines that existed in 1994-96 never saw light of day via IPO matter? Once public even runts can get healthy on.


Internet Investment Symposium '98, Oct 8-9 @ Fall Internet World!

"The power conference to network with industry influencers and decision makers." - Yahoo co-founder Jerry Yang
Click the above link now and get this year's power lineup.


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