For an IPO to do well it takes more than a good business plan. Kind of
simple, huh? Well, this is not always the case with some IPOs. One example
is eChapman.com.
eChapman has set its price range at $12-14 and they are underwriting their
own IPO (under The Chapman Co.). The proposed ticker symbol is ECMN.
First of all, always be wary of a company that underwrites its own IPO.
Definitely it is not the core competency of a company to do so. Rather, it
makes much more sense to hire a quality team. For example, a Wall Street
firm will help create an investor base, as well as provide ongoing research.
This helps to move the stock price.
Actually, companies that self-underwrite their offering typically do so
because underwriters do not want to handle the IPO. It is a big red flag.
Next, you need to look at the core business of the IPO. In the case of
eChapman, it intends to become an interactive online community offering
financial services; lifestyle, educational and cultural content targeting
African-Americans, Asian-Americans, Hispanic-Americans and women market
segments. However, they have so far only launched a prototype of their Web
site.
True, the financial services marketplace is huge. Jupiter Communications
estimates that assets under management in online trading accounts will
increase sevenfold from $415 billion at the end of 1998 to more than $3
trillion by 2003. But you can be sure that the competition for those
dollars is intense. eChapman is going up against large investment banks
such as Ameritrade, DLJdirect, eSchwab, E*Trade and Wit Capital.
Besides, the major portals have been allocating substantial resources in
globalizing their offerings. Whats more, these companies – such as Yahoo!,
Lycos, Excite – have been doing this for several years.
In other words, do we need another portal? I think not. And investors will
likely think the same.