Net IPOs: Some Get Better With Age
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There are two ways of looking at Internet IPOs: 1) rocketships that you can't get ahold of and 2) maybe they gain more over time and not just first day moonshots. My analysis of the latter shows that the handful of Internet stocks that squeezed out of the gate earlier this year are up 276% on average from the IPO pricing. And here's the better part: they are up 102% from the low--the low is where anyone could have bought in after it was trading.
Here's the IPODEX (we'll add the others next week):
|Company||Stock||Shares||IPO share||25-Mar||Percent||Change from||Share|
|name||Symbol||sold||price||close||change vs. 3/18||IPO||high|
|MarketWatch||MKTW||2.75||$ 17.00||$ 68.50||-1%||303%||$ 130.00|
|Healtheon||HLTH||5.00||$ 8.00||$ 37.31||-3%||366%||$ 48.63|
|VerticalNet||VERT||3.50||$ 16.00||$ 108.50||17%||578%||$ 120.00|
|Allaire||ALLR||2.50||$ 20.00||$ 56.00||8%||180%||$ 69.00|
|Pacific Internet||PCNTF||3.00||$ 17.00||$ 45.88||0%||170%||$ 88.00|
|Prodigy||PRGY||8.00||$ 15.00||$ 37.69||-2%||151%||$ 50.63|
|Vignette||VIGN||4.00||$ 19.00||$ 71.63||4%||277%||$ 79.00|
|WebTrends||WEBT||3.50||$ 13.00||$ 45.00||0%||246%||$ 59.00|
|TOTAL||32.25||$ 125.00||$ 470.50||4%||276%||$ 644.25|
|AVERAGE||4.03||$ 15.63||$ 58.81||4%||276%||$ 80.53|
|MEDIAN||3.50||$ 16.50||$ 50.94||4%||209%||$ 74.00|
Looking at a more recent batch of newbies on the Street shows stocks like iVillage (NASDAQ:IVIL), Autoweb (NASDAQ:AWEB), Miningco (NASDAQ:MINE) and OneMain (NASDAQ:ONEM) rose an average 143% from IPO price through March 25.
|Who||Ticker||Shares offered||Price||Gross||3-25 close||% Change|
|iVillage||IVIL||3.65||$ 24.00||$ 87.60||$ 75.00||213%|
|Autoweb||AWEB||5.00||$ 14.00||$ 70.00||$ 33.38||138%|
|Miningco||MINE||3.00||$ 25.00||$ 75.00||$ 58.94||136%|
|OneMain||ONEM||8.50||$ 22.00||$ 187.00||$ 39.56||80%|
Take a look at the first table and then the second. Note the percent run from IPO pricing. That juxtaposition means that perhaps Internet IPO stocks aren't all dip and flip for daytraders and money managers. Here's how: if the latter group had posted large upside vs. the former group then the pump and dump speculation caffeine cowboys would be buying shares and controlling the market more.
Since the earlier group of Internet IPOs is up more than the latter I interpret that as a sign that Internet stocks coming public this year (what IPODEX tracks) look like they have legs in the aftermarket.
The bottom line is what are the chances that everyone of these IPOs will continue to support its valuation. The more unique the story for each the better its chances in my view. For example, iVillage focuses on women. That segment is or soon will account for about 50% of all adult Web users. More than 80% of all advertising is aimed at women, who do about 90% of all shopping. At $1.7 billion and $15 million revenue for 1998 I think it's too soon to call iVillage the 'Yahoo' of women's Web. I forecast $25 million revenue for 1999 and am comfortable with a $1.5 billion valuation based on year 2001 estimated revenue that could exceed $75 million. The key question I have is can iVillage execute? So far, yes.
Autoweb (NASDAQ:AWEB) was Wall Street's first real chance to invest in the Internet-auto space. while not as well known as the clunkier named Autobytel (IPO pending) nonetheless Autoweb posted $4.8 million revenue in fourth-quarter 1998. Can three or four auto-Internet dealer networks win? Maybe. Remember Hertz, Avis and Budget. Autobytel and Microsoft's Car Point appear formidable.
MiningCo (NASDAQ:MINE) concept has the advantage of adding a layer of value between pure indexing of Web pages and the end user. The value of having people find and point to Web sites is debatable but more valuable than spiders doing it for sure. But in the end the guide space is crowded and now the big players are anything up to the cross-platform wars, telco an cable. The capital requirements to compete on a meta-guide level are steep. I believe branding alone will cost MiningCo chunks of its gross IPO proceeds. Partner or die.
OneMain (NASDAQ:ONEM) as a rural ISP trading at $2,200 per subscriber. That's on par with rival ISPs Earthlink (NASDAQ:ELNK) and Mindspring (NASDAQ:MSPG), despite the fact that these two have three times the subscribers. OneMain sold 8.5 million shares at $22 through BT.Alex.Brown, raising about $187 million.
OneMain's IPO proceeds go towards its rolling up 17 ISPs. Perhaps you have to factor in one intangible in OneMain's valuation: former Senator and 1996 Presidential candidate Bob Dole just signed on as a director. Go Bob, go.
Accolades for Internet Stock Report:
"Fresh and provocative" -CBS Marketwatch, who named Steve Harmon as one of the "Best of Wall Street" and only independent analyst honored
"I am a huge fan of Steve Harmon's analysis" -Kleiner Perkins' John Doerr