E-Mailbag Monday: OnDisplay, MotherNature.com, Offering Price

What looks good in the IPO market this week?

Reply: Well, there appears to be no equivalent of VA Linux for this
week. However, there is an interesting IPO to keep an eye on. The company
is called OnDisplay.

The company is a developer of high-end applications that allow companies to
create leading-edge e-business marketplaces. To be competitive, companies
need to constantly push the envelope of the Net. With OnDisplay, companies
can better able manage their supply chains, distribution and customer
service channels.

With OnDisplay technologies, companies can not only find
efficiencies, but also revenue opportunities. What’s more, companies need
not reinvent the wheel, but can get to market much quicker. Customers
include Aspect Development, FASTXchange, PurchasePro.com and
Travelocity.com. The lead underwriter is Robertson Stephens and the proposed ticker symbol
is ONDS. The price range is $11-$13.

MotherNature.com: A Natural?

MotherNature.com had its IPO on Friday, but fell. Is this an opportunity?

Reply: In a word, no. The IPO was priced at $13 and fell to
$10-5/16. This is known as a “broken” deal. In fact, when this happens,
the stock usually treads water. What’s more, a broken deal is particularly
worrisome when it occurs when the IPO market is red hot (as has been the
case for some time).

In the first nine months of 1999, revenues were $2.6 million (there are
136,000 registered members). Losses were a staggering $33.8 million.

True, the site is a great place to get useful information about natural and
healthy products. What’s more, there are about 13,000 vitamins, minerals
and other healthy products on the site. But I think the main problem with
the stock is differentiation among the many competitors. In fact,
competitors are everywhere: Vitamins.com, VitaminShoppe.com, CVS.com,
PlanetRx.com, Drugstore.com and on and on.

So, I would be careful with MotherNature.com.

Offering Price

I’m new to the IPO market. I keep hearing the phrase “offering price.”
What does that mean?

Reply: When a company goes public, it raises a fixed amount of
money. This is decided by both the issuer and the underwriter (the
underwriter is the firm that helps a company go public). So, a company may
decide to issue 5 million shares at $10 a piece, raising $50 million. The
$10 is the offering price. Unfortunately, this is the price that only a
select few have an opportunity to get — such as major institutions and very
wealthy individuals. Now, once an IPO starts trading, the stock will
usually shoot-up. In some cases, the premiums can be at nose-bleed levels
(as was the case with VA Linux).

But more and more, individual investors are getting an opportunity to
purchase IPOs at the offering price. Examples of firms doing this include:
Schwab, E*Offering, DLJDirect, and Wit Capital. I suspect that in the
year 2000, we will see even more access of IPOs for individual investors.


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