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GeoCities Defies Market on First Day of Trading

The Dow is down 200 points and NASDAQ is down more than 50 points today but that didn't stop the hot IPO from GeoCities (NASDAQ:GCTY) from roaring out of the starting gate. The company jumped beyond its opening price of $17.

GeoCities' shares opened today at $30, popping to a $36 high, defying the plungefest on Wall Street.

Our number crunching shows that the new public entity trades at an estimated 100x revenue on a fully-diluted basis or 72x revenue on primary share basis.

That's based on an estimated $15 million revenue for calendar 1998 which we think GeoCities could exceed if commerce deals get done. For the six months ending June 30 GeoCities posted $5.5 million revenue.

Any time you see a revenue multiple north of 50x it causes calculators to short out in anything but the pioneering firms in the Web space, those that can grow revenue, marketshare and mindshare and ultimately translates those into earnings.

As an industry leader we think GeoCities, with its top 10 Web site status and user base, could grow revenue and bring in earnings if it translates users into revenue without trouncing on users. It's a delicate act. For example, most of GeoCities revenue comes via advertising on member pages, some members which may not want ads on their creations.

Here's the stats for GeoCities debut:

GeoCities GCTY
Priced $ 17.00
Open $ 30.00
% Change 76%
Price at 2PM eastern $ 35.31
Primary shares 30.66
Primary market cap (mil.) $1,082.72
Fully-diluted shares (mil.) 42.89
FDS market cap at open (bil.) $1,514.55
Estimated 1998 revenue (mil.) $ 15.00
Primary mkt cap/est. revenue 72
FDS mkt cap/est. revenue 101
© 1998 Mecklermedia, Internet.com  

There's plenty of competition also. Angelfire (part of WhoWhere? which just sold to Lycos for $133 million stock today), Tripod (also part of Lycos), XOOM, theglobe and others all are moving rapidly in this huge market for free Web pages. Media Metrix reported August 10 that Angelfire was the fastest-growing Web site in the world this year, followed closely by XOOM. GeoCities ranked eighth on that list. Although in the big picture GeoCities is ranked sixth, ahead of Lycos, and highest of any community-only site. And now that it's public GCTY shares may be used as acquisition currency to consolidate the market and further establish its lead. More in tomorrow's Internet Stock Report.