April’s Altitude Adjustment

Last month’s record number of Internet IPOs demonstrates that interest
in new cyber stocks remain at an all-time high.

But while the 17 Internet IPOs released in April easily eclipsed the
previous record of 13 set just one month before – how’s that for
momentum? – the average percentage gain in the first-day closing price
over the offer price for Internet IPOs in April was 116%, the lowest
amount this year.

Compare that to the averages for January (241%), February (122%) and
March (134%), and it might be reasonable to conclude that the Internet
IPO market began to reach a saturation point in April.

However, a closer look at the numbers indicates that the two Internet
stock market corrections in mid-month may have had more to do with
April’s relative first-day shortfall than did any surplus of new
Internet stock plays.

The 12 Internet IPOs released after the first market correction on April
14 had an average first-day close of 98% above the offer price. In
contrast, the first-day closing price of the five initial April IPOs
averaged 162% above the offer amount.

Certainly April had its share of moonshots, with three Internet IPOs –
from Log On America, Rhythms NetConnections and Marimba – each ending
their first day of trading at more than 200% above the offer price.

More telling was the high percentage of Internet IPOs that failed to hit
the stratosphere. Seven out of 17 – that’s 41% — failed to reach at
least double the offer price when the closing bell rang on their first
day of trading. And three of April’s IPOs – from Town Pages Net.com,
AppliedTheory and Launch Media – were among the five worst of 1999 in
terms of opening-day performance. All three began trading after April
14.

Below are charts showing this year’s 10 best Internet stock debuts —
measured by first-day closing price as a percentage of offer price – and
a chronological listing of all Internet IPOs and their first-day
performance through April.

10 Best of 1999

1. CBS MarketWatch.com (Jan. 15) – 474%
2. priceline.com (March 30) – 331%
3. Healtheon (Feb. 11) – 292%
4. Log On America (April 22) – 250%
5. iVillage (March 19) – 234%
6. Rhythms NetConnections (April 7) – 229%
7. Tut Systems (Jan. 29) – 219%
8. Marimba (April 30) – 203%
9. Autoweb.com (March 23) – 186%
10. VerticalNet (Feb. 11) – 184%

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