Altitude Woes Plague Internet IPOs

With the notable exception of B2B software vendor webMethods’ (WEBM)
moonshot IPO last Friday (a first-day gain of 508 percent), the Internet IPO
skies have been uncluttered in recent days, with a couple of Net debuts
gaining modest altitude and several others misfiring altogether.

Online loan middleman Lending Tree (TREE)
rose 50 percent in its first day of trading on Wednesday, which was a rocket
blast compared to how new Net stocks performed on Tuesday.

The casualty
list: etailer VarsityBooks.com (VSTY),
down 1.2 percent; health systems’ software vendor VantageMed (VMDC),
down 16.2 percent; and access and services provider SAVVIS Communications (SVVS),
no gain. Only Sunhawk.com (SNHK),
a maker of digital rights management software, showed any upward
movement in its debut, gaining 54.2 percent.

And on Monday, b2bstores.com (BTBC)
climbed a miniscule 1.6 percent.

Has the Internet IPO market hit a mid-winter chill? I don’t think so,
though the ongoing concerns about interest-rate hikes may be acting as a
drag. Rather, it’s because investors continue to bet primarily on hot
sectors and markets, and none of the five Internet companies mentioned
above is in an Internet “sweet spot.” There are no Linux offerings, no
solid business-to-business plays.

Oh sure, you could count b2bstores.com, which offers janitorial and
office supplies online. But it was a small offering ($32 million)
managed by low-wattage underwriters (Gaines, Berland and Nolan
Securities). More significantly, b2bstores.com only began commercial
operations in September, and had only $2,191 in revenues through Dec.
31. Yes, that’s $2,191 as in two thousand dollars and change.

webMethods, on the other hand, not only has a B2B story, it is riding a
new technology (XML) that could be the next Linux in terms of attracting
investment money and industry support.

So what will be the next Internet IPO to go into orbit? Eloquent, a
maker of rich-media tools for Web-based presentations, opened Thursday
at 38 per share, 138 percent above its $16 offer price. But it was falling in
the afternoon, and may not even post a three-digit percentage gain.

I’ll put my money on Inforte, a Chicago-based Internet consulting and
services company that was scheduled to go public this week. On Friday,
I’ll explain why.