A Hot And Crowded Launch Pad

I’m going on vacation next week, but the market apparently isn’t. There
are as many as 15 IPOs from Internet companies slated to go out in the
five days starting on July 19.

Add in leftovers such as Travelscape.com and Cyber Merchants Exchange,
and come Monday we could see the busiest IPO launch pad of the month.

Here are what I think are the more notable of the bunch:

HealthGate Data Systems, a provider of health care information via the
Internet to medical professionals. Based in Burlington, Mass.,
HealthGate hopes to raise $50.6 million in an offering of 4.6 million
shares in the $10-$12 price range. Nasdaq ticker is HGAT, while the lead
underwriter is SG Cowen.

This offering may be generating more buzz than any of the others, mostly
due to the recent success of Healtheon and drkoop.com stock. HealthGate
had only $2.4 million in revenue in 1998 – and worse, double-digit
revenue growth – though losses were only $2.9 million.

Overall, HGAT is expected to pop on its IPO. If it doesn’t, it’s worth
remembering that Healtheon shares, which were offered in February,
didn’t take off until mid-May, when the company announced its merger
with WebMD.

Hoover’s Online isn’t a household word, unless there’s an investor living with
you. The company provides business information, especially financial
data, primarily through the Internet.

The Austin, Texas-based company plans to offer 3.25 million shares in
the $12-$14 range to raise $42.25 million. Lead underwriter is J.P.
Morgan Securities; Nasdaq symbol is HOOV.

Hoover’s is a popular stop among investors doing online research. The
company racked up $9.4 million sales last year. That’s probably more
annual sales than most Internet companies have when they go public, but
the revenue growth rate from ’97 was only 71%.

The online financial and business information market is packed with
competitors, but Hoover’s brand name within its target audience –
investors – should ensure it a solid debut.

MP3.com, the latest in a flurry of online music companies to go public,
has the week’s largest offering. The San Diego company seeks to raise
$209 million in an offering of 12.3 million shares priced between $16
and $18. (Expect a high-end pricing, maybe even $20.)

MP3.com does not own the rights to the MP3 data compression technology
that is angling to be the Internet standard for audio downloads. But it
owns a swell domain name, and that should confuse enough investors to
give the IPO a strong push and some flight time.

The company makes most of its revenue ($1.2 million last year) from
advertisers, but I suspect ad revenue will hit a low ceiling because
there won’t be much driving traffic to this site, particularly the
all-important repeat traffic. For while MP3.com offers thousands of
songs, they’re almost all from the guy you saw down at the open mike
night in the local bar.

And even if that guy is great, you’ll most likely have to buy a
compilation CD to hear him. I don’t think a lot of people will go for
that.

With long-term revenue growth from advertising and e-commerce far from
ensured, MP3.com strongly needs a new revenue stream. Right now it pays
nothing for its content (artists submit songs for free in exchange for
exposure); it may need to revisit that strategy and pay for rights to
commercially viable acts, especially since the IPO will give the company
a war chest.

See you on July 26.


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