Monday eMailbag: LinuxOne, Insweb, Green Shoe
LinuxOne should be going public soon. What do you think of the
company?
Reply: I’ve written a few articles on the subject of Linux
– and they
have, by far, generated the most interesting (and heated) emails.
Okay, here I go again. In a word, my opinion on LinuxOne is:
No.
Revenues? Zero (the company was started in March of this year).
The site?
Well, it’s OK. Also, the company is planning to raise a small
amount of
money (about $25 million), which is paltry compared to RedHat and
VA Linux.
However, I would not be surprised if LinuxOne had a nice pop on
the first
day – given the fact that Linux is red hot. But for the
long-term, I would
stay away.
The most amusing part of the IPO is that the prospectus has many
sections
that are word-for-word from the RedHat prospectus. Then again,
the company
is using a small underwriter (Capital West Securities).
InsWeb: What’s the Best Policy?
What’s your take on InsWeb?
Reply: I’ve been a fan of InsWeb
(INSW)
for some time. Just like any other financial product, insurance
fits the
Web distribution model. Users can make price comparisons; learn
about the
intricacies of insurance; and so on.
InsWeb has agreements with 49 insurance companies covering auto,
homeowners,
renters, term, health and even pet insurance. In fact, Gomez
Advisors
ranked the site the No. 1 for online insurance. InsWeb also got
a #1
ranking from Lafferty Information and Research Group.
InsWeb has been able to capitalize on its leadership. In the
latest
quarter, revenues were $7 million, which was a 39% sequential
increase from
the quarter before and a 457% increase from the same period a
year ago.
The company should be able to increase the momemtnum, as the
company has
recently launched a two-year $75 million marketing campaign and
signed a
variety of distribution deals, such as Morningstar, ZDNet and
Microsoft.
Green Shoe
I’ve been following IPOs lately. I’ve heard the word ‘green
shoe.’ What
does this mean?
Reply: In the underwriting agreement, there is a clause
that is known
as the overallotment provision. The less technical name is
‘green shoe.’
Interestingly enough, the phrase was first used with the Green
Shoe Company.
The clause allows the underwriter to purchase an extra amount
of shares
several weeks after an IPO (the amount can be as much as 15%).
Typically,
the underwriter will exercise this option when the stock goes
above the
offering price.
