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Cutting Bait: Zapata All Fished Out On Web?

In one of the now infamous press releases cranked out earlier this year, Zapata's goal was to be 'the roach motel of the Internet, users come in but don't get out.' And therein lies the heart of Zapata's thorough ignorance of the Internet. Roach motels? These are death traps for bugs. Yesterday it was Zapata itself who found the words prophetic.

Its grandiose play to create one of the Internet's "biggest players" fizzled as Zap.com was zapped, a victim of its own hype.

The fish-oil and investment concern Zapata Corp. (NASDAQ:ZAP) pulled the plug on its wired world domination plans even before the juice started flowing, citing "market conditions," referring to Wall Street's lack of enthusiasm for new issues of late.

The zap didn't surprise us one bit. This is the firm that faxed over a $1.7 "bid" for Excite in May, "offered" WhoWhere a rumored $400 million, and, having been rejected smartly by more experienced Internet players, promptly went about acquiring about 20 mostly unknown Web sites that offered stock quotes, shareware, chat, to build into a "portal" (since that was the popular lingo circa May-June) that would "compete" with Yahoo. Uh huh.

We first visited the notion (or fantasy) back in July when the flakes were flying Internet Stock Report, July 31.

That was when ZAP shares went ballistic on Zapata Corp.'s high-profile "shock jock-like" media blitz about how it planned to create on of the top two Web destinations. ZAP jumped more than 100% to $21.50 per share in early July in a single day as its zeal infected the Internet industry with a mix of comic relief and question marks.

October 15, reality check saw it at $6.875 per share, lower than when the "let's be an Internet giant" saga began in July.

Can we blame the IPO market? Aside from the fact that Zapata management's approach to the Internet was fax and press release heavy, in our opinion, we think that they simply never had a clue as to how the Web works.

What the IPO market drew out was how short-sighted Zapata's "vision" (the word seems too strong to use for such a firm) was. It was based on a frenzy for Internet stocks and seemed to be following the flavor of the week. If bio tech resurges, will it announce that it's forming a bio tech concern for IPO?

As for the Internet stock IPO market it's far from dead. Winners and losers populate Internet.com's IPO Index which tracks this year's offers, 8 of the 14 stocks traded above the initial public offer price, a slightly-bullish sign in our view.

INTERNET.COM'S

Ticker

Share price

Share price

% change

% change

IPO INDEX

symbol

10/15/98

10/1/98

period

from IPO

Inktomi

INKT

$84.19

$66.94

25.8%

367.7%

Broadcom

BRCM

$70.00

$65.75

6.5%

191.7%

Verisign

VRSN

$29.13

$27.63

5.4%

108.0%

Broadcast.com

BCST

$37.00

$42.63

-13.2%

105.6%

ebay

EBAY

$32.63

$40.00

-18.4%

81.3%

Exodus

EXDS

$25.88

$23.06

12.2%

72.5%

GeoCities

GCTY

$18.63

$21.50

-13.4%

9.6%

DoubleClick

DCLK

$18.19

$20.38

-10.7%

7.0%

ISS Group

ISSX

$21.75

$29.75

-26.9%

-1.1%

Digital River

DRIV

$7.44

$7.88

-5.6%

-12.5%

Netgravity

NETG

$7.00

$10.69

-34.5%

-22.2%

CDnow

CDNW

$8.50

$8.00

6.3%

-46.9%

Cyberian Outpost

COOL

$9.00

$10.13

-11.1%

-50.0%

24/7 Media

TFSM

$6.75

$10.38

-34.9%

-51.8%

TOTAL

376.06

384.69

-2%

68%

AVERAGE

26.86

27.48

-2%

68%

(c) 1998 Mecklermedia, Internet.com - Internet Stock Report

Inktomi (NASDAQ:INKT) led all-comers with a 368% rocket ship rise to $84.19 per share October 15, from its IPO pricing June 10 as its network caching and Web search softwares gained big-name buyers including Microsoft (NASDAQ:MSFT), AOL (NYSE:AOL) and Yahoo (NASDAQ:YHOO).

Broadcom (NASDAQ:BRCM) came in second, with a 192% rise to $70 per share as it holds a monopoly on cable set-top chips for broadband.

The most recent IPO, ebay (NASDAQ:EBAY), showed an 81% climb from IPO September 24. For the past two weeks, however, EBAY shares have been bid down on Yahoo ramping up a similar service powered by auctioneer Onsale (NASDAQ:ONSL).