TicketMaster Online-CitySearch: IPODEX Shows Hot Market Vs. Existing Stocks
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Like Scrooge, Internet stocks have been on a wild ride from the ghost of Christmas past, present and future. This holiday season Wall Street shopped early (November) for e-tail stocks and now has turned its fickle attention to Internet IPOs.
The past three Internet stock offers from very different companies have done well in the aftermarket: EarthWeb, theglobe.com and the latest reindeer to pull the IPO sled, TicketMaster Online-CitySearch (NASDAQ:TMCS).
TMCS sold 7 million shares at $14 per share, raising gross proceeds of $112 million. Of that, $50 million immediately goes to a loan from TMCS majority equity holder USA Networks, run by Barry Diller of TV biz fame.
TicketMaster Online-CitySearch IPO
|original target||actual IPO||at high 12/3||close 12/3|
|Price per share||$ 9.00||$ 14.00||$ 56.38||$ 40.25|
|Market capitalization||$ 625.38||$ 972.81||$3,917.30||$2,796.83|
|IPO cap/annualized revenues||18||27||111||79|
|Fully diluted/1999 est. revenue||14||22||89||64|
On a fully-diluted basis our analysis shows TMCS at $1.2 billion we think TicketMaster Online-CitySearch debuted at fully-diluted 22x estimated 1999 revenue.
At its peak of $56.375, TMCS held a $3.9 billion market cap or about 89x our estimated 1999 revenue for the company. Fully-diluted market cap pushed the multiple to 139x. By the close of trading its first day yesterday, at $40.25 per share, TMCS was at 64x next year's revenue.
Just six months ago CitySearch was a standalone firm with its own IPO plans that would have valued the guide/directory at about 21x our estimated revenues for CitySearch as our table illustrates:
|CitySearch's value before the merger|
|Target price||$ 13.00|
|Primary market cap||$ 270.25|
|FDS market cap||$ 313.08|
|Working cap||$ 54.57|
|Long-term debt||$ 2.32|
|Enterprise value||$ 260.83|
|1997 sales||$ 6.18|
|Six mos. To June '98||$ 5.58|
|Annualized sales||$ 11.15|
|est. 1999 revenue||$ 15.00|
Shortly after filing its IPO intentions in May, CitySearch cancelled its plans, merged with USA Network's TicketMaster Online this Fall and the combined entity stepped up to the plate on Wall Street with the successful IPO. One area of concern for us centers on the heavy losses TMCS posted for the nine months ending September 30, however, a $56.8 million loss.
And CitySearch plans on setting up its own local content productions which we think may be a mistake due to the high cost of creating deep-enough content for the cities it covers.
CitySearch produces 13 city guides and owns seven of them, with six produced by media partners. CitySearch's revenue model relies on small businesses paying for placement or ads in the guide.
The focus on new issues came at the expense of the handful of Internet stocks in IPODEX, each of which had gains and then profit taking kick in to close the period November 25 to December 3, down a blended 12%. Cyberian Outpost (NASDAQ:COOL), which ran to a new all-time high of $45.50 on hordes of retail investors piling in this week, ended up losing 36% for the period.
|INTERNET.COM'S||Ticker||Share price||Share price||% change||% change|
Websteader theglobe.com (NASDAQ:TGLO) also dropped, ending on the down side 28% as traders and investors geared up for the next IPO or for the basket of e-tail stocks. These include several old line land-based stores proclaiming Internet intentions and seeing shares soar.
We would highlight the notion that simply because a company opens a Web site (KTEL, Sharper Image, etc.) doesn't always mean it's a winner. Our question is this: what took them so long?
On new IPOs in the pipeline, uBid's due to start trading today. The Web-based auctioneer joins an increasingly crowded auction space. uBid is more like Egghead.com (NASDAQ:EGGS) than Onsale (NASDAQ:ONSL).
EGGS closed December 3 at $16.0625 per share, or a market cap of $392 million. But shares have traded between $4 and $40 the past 52 weeks, a display of the volatility inherent in many Internet stocks and perhaps a foreshadowing of the risk of something like uBid.
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