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RealTime IT News

Good as Goldman?

Though Wit Capital's IPO likely is at least several weeks away, it may have started building momentum already. Securities giant Goldman Sachs & Co. announced plans on Monday to buy a 22 percent stake in the online brokerage firm. Sources say the deal is valued at about $25 million.

As noted in the Midday Report, Wit on March 18 filed papers for an IPO the company hopes will raise $80 million. Interestingly enough, Goldman isn't even one of the underwriters for the Wit offering. Wit is underwriting itself, along with Bear Stearns and Thomas Weisel Partners.

This kind of bottom-line endorsement from arguably the premiere underwriter on Wall Street should further build the buzz about Wit's IPO, especially among online traders, many of whom have strong feelings (pro and con) about the company.

Goldman's goal in purchasing a chunk of Wit is to create heightened interest among institutional investors in its own pending IPO by building an Internet strategy. Monday's move probably is just the first step -- don't be surprised to see Goldman eventually buy a majority stake in Wit, or even spin off its own online brokerage IPO, as Donaldson Lufkin & Jenrette is doing with DLDdirect.

Obviously, even without the equity play in Wit, Goldman Sachs already has an Internet "story." Since 1996, Goldman has acted as lead underwriter in 13 Internet IPOs. They are: Checkpoint Software, Open Market and Yahoo! in '96; RealNetworks in 1997; DoubleClick, eBay, Entrust Technologies, Exodus Communications, GeoCities, Inktomi and ISS Group in '98; and iVillage and pcOrder.com so far this year (with ZDNet, eToys and TheStreet.com in the pipeline).

Among that group are some certified success stories, including:

  • Portal pioneer Yahoo, a superstar of the Internet stocks world, with a current market capitalization of nearly $4 billion.

  • eBay, which opened this morning at $145 per share, eight times its $18 offer price last September and three times its first-day closing price of $47.38.

  • ivillage, which went public March 19 and was trading this morning at $100, four times its $24 offer price and 25% above its $80 first-dayclose.

Of course, the Goldman imprimatur can't guarantee chart altitude for every Internet stock. E-commerce services vendor Open Market's stock price has been trading below its $18 offering price for most of the past two years, and well below its May 23, 1996 first-day close price of $39.88. Open Market opened Tuesday at $14.19.