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Third Rock From The Sum: theglobe.com's IPO May Go This Week

Unlike planet Earth, which is primarily covered with water, theglobe.com looks parched for revenue so far, in its path to liquidity via IPO. First six months generated just $1.1 million (with 93 full-time employees) with a loss of $5.8 million. We target its public debut, which may go this week, at 56x estimated revenues. Let's take a spin of theglobe inside the numbers:

theglobe.com proposed
pro forma IPO estimates ticker
Proposed ticker TGLO
Does what? Websteader
Shares offered 3.10
Greenshoe 0.40
Target share price $ 12.00
Gross proceeds $ 38.45
Shares outstanding 9.79
IPO market cap $ 117.50
Options/warrants 3.92
Fully-diluted shares (FDS) 14.12
FDS market cap $ 169.38
Working capital $ 43.95
Long-term debt $ -
Warrant inflow $ 16.10
FDS enterprise value $ 109.33
Latest full-year revenue $ 0.77
Six mos. revenue to 6/98 $ 1.17
Est. calendar (CY) 1998 revenue $ 3.00
Six mos.loss to 6/98 ($5.82)
Est. CY99 revenue $ 7.00
   
FDS enterprise/latest year rev. 141.99
FDS market cap/est. CY98 revenue 56.46
FDS market cap/est. CY99 revenue 24.20
FDS enterprise/CY1998 36.44
FDS enterprise/CY1999 15.62
   
Employees (full-time) 93
Enterprise value/employee $ 1.18
Latest six mos. revenue/employee $ 0.01
Lead underwriter Bear Sterns
© 1998 Mecklermedia  
all figures in millions, except share price, multiples  

The well-designed site, one of the more attractive Webstead sites on the Internet, offers users the chance to build Web pages, chat, e-mail and rudimentary shopping services. Areas divide by topic and interest, similar to GeoCities, XOOM or TalkCity. Let's look closer at theglobe's valuation.

Fully-diluted market cap reaches about $170 million. With working capital and warrant inflow, the enterprise value comes down to a more gravity-like 16x next year's revenues, which we think is a more appropriate valuation for a firm in its first iteration of really generating any revenue at all.

For comparison, Websteader and direct marketer XOOM, (pending IPO also) generated $2.6 million the first six-months of 1998 (with 39 full-time employees).

XOOM direct sells to anyone who signs up with its service as part of the bargain of having a free Web site allocation. theglobe.com, like others in the community space, relies more on ads than selling direct. Both sites show strong growth this year, XOOM being the second-fastest growing site and theglobe.com the sixth-fastest, according to Media Metrix.

theglobe.com began in May 1995, and now boasts more than 1.9 million members and 6.5 million unique visitors to the site. Besides Webstead space, chat and e-mail, it offers users news, weather, movie and music reviews, multi-player gaming, horoscopes and personals.

About 100,000 new members have joined theglobe.com each month since October 1997 with about one-third of visitors coming from outside the U.S. Chairman Michael Egan came on board in August 1997, through his Dancing Bear Investments, the primary shareholder in theglobe.com. >From 1986 to 1996, Egan was the majority owner and Chairman of Alamo Rent-A-Car.

Fellow board member Wayne Huizenga ran Blockbuster from April 1987 through September 1994. The two co-founders, each in their mid-20s, act as co-CEOs. Bear, Stearns & Co. Inc. and Volpe Brown Whelan & Company are the underwriters.

Overall, we could see how theglobe.com could fit with something like Snap!, the NBC-CNET portal wannabe, or perhaps a media firm like MTV, who may want to wrap some users around its offerings.

Wall Street may show some interest if GeoCities is any indication. GCTY trades about 39% of its high, however. Is the world as round as theglobe would like it to be?