Top of the pops: new IPO Musicmaker.com (NASDAQ:HITS) soared 71% yesterday to a market cap of $716 million its first trading day. Revenue? $20,160 (that’s 20 thousand, not a typo) for first quarter this year. Meanwhile, slightly different music etailer CDNOW (NASDAQ:CDNW) market cap was $534 million. Its 1Q revenues? $22.8 million.
Why the Beatle-esque rush the stage move for HITS while CDNW sits in the bargain music bin? I can’t justify the valuation gap between the two but the only edge Musicmaker has is it allows buyers to customize their own CDs, pick and choose the songs on them. Largely from the EMI catalog (EMI owns 50% of HITS).
So Musicmaker.com gets kudos for its customizing focus but the valuation gap seems out of whack. HITS raised $117.6 million in the offering, selling 8.4 million shares at $14.
HITS raised $35.2 million more than the Internet IPOs in the group shown here, which raised $82.4 million on average.
| Company | Stock | Shares | IPO share | 7-Jul | Percent | Change from |
| name | Symbol | sold | price | close | change vs. 6/23 | IPO |
| Allaire | ALLR | 2.50 | $ 20.00 | $ 62.19 | 23% | 211% |
| Autoweb | AWEB | 5.00 | $ 14.00 | $ 17.00 | 36% | 21% |
| About.com | BOUT | 3.00 | $ 25.00 | $ 49.88 | 29% | 100% |
| BackWeb | BWEB | 5.50 | $ 12.00 | $ 26.00 | 30% | 117% |
| Healtheon | HLTH | 5.00 | $ 8.00 | $ 77.06 | -12% | 863% |
| iVillage | IVIL | 3.65 | $ 24.00 | $ 56.75 | 29% | 136% |
| drkoop.com | KOOP | 9.40 | $ 9.00 | $ 33.56 | 205% | 273% |
| MarketWatch | MKTW | 2.75 | $ 17.00 | $ 55.75 | 9% | 228% |
| Marimba | MRBA | 4.00 | $ 20.00 | $ 46.00 | 20% | 130% |
| OneMain | ONEM | 8.50 | $ 22.00 | $ 24.50 | 38% | 11% |
| Priceline.com | PCLN | 10.00 | $ 16.00 | $ 111.00 | 25% | 594% |
| Pacific Internet | PCNTF | 3.00 | $ 17.00 | $ 48.63 | 13% | 186% |
| Prodigy | PRGY | 8.00 | $ 15.00 | $ 26.63 | 16% | 78% |
| StarMedia | STRM | 7.00 | $ 15.00 | $ 57.00 | 14% | 280% |
| Verticalnet | VERT | 3.50 | $ 16.00 | $ 114.56 | 61% | 616% |
| Vignette | VIGN | 4.00 | $ 19.00 | $ 66.25 | 41% | 249% |
| WebTrends | WEBT | 3.50 | $ 13.00 | $ 45.50 | 37% | 250% |
| TOTAL | 88.30 | 282.00 | 918.25 | 26% | 226% | |
| AVERAGE | 5.19 | 16.59 | 54.01 | 26% | 226% | |
| MEDIAN | 4.00 | 16.00 | 49.88 | 16% | 212% |
These 17 IPOs raised a total $1.4 billion this year but are by no means the complete list of Internet debuts. This sample group serves as a snapshot for the market.
Since June 24, together they have gained an average 26% through July 7 and 226% from the IPO price itself.
While most investors don’t have a prayer of getting IPO shares, the triple-digit runs from pricing lend some support to the notion of an IPO auction (sort of what OpenIPO does).
Basically, such strong runs from the gate mean that the firms probably left some money on the table at IPO time.
But they can (and many no doubt will) do secondary offerings and make up some of the gap there.
The best performer in the list is drkoop.com (NASDAQ:KOOP), which I didn’t have much interest in until AOL inked a content deal with the Web health firm. KOOP shares jumped 205% from June 23.
One deal does not a Web powerhouse make, however. I think drkoop.com will need to partner with others to grow the brand and service (which = more revenue/earnings potential).
Second-biggest riser is VerticalNet (NASDAQ:VERT) with a 61% pop since June 23. VERT was on a buying spree June 30 and acquired 3 industrial Web sites.
While I like VERT’s B-2-B mission I think other stocks are more fundamentally B-2-B plays. Ariba (NASDAQ:ARBA). Commerce One (NASDAQ:CMRC). Those to me are more nuts and bolts, B-2-B ecom, than VERT at this juncture.
Autoweb (NASDAQ:AWEB) has been a sleeper in my opinion. July 6 it signed a two-year marketing agreement with AOL that sent shares up. AWEB gained 36% to $17 per share since June 23, when it traded below its IPO price.
Upcoming IPOs blipping across my radar include Liquid Audio, MP3.com and Interliant. The former provides technology to allow music distribution with copyright intact via the Web and has the support of the major music companies.
MP3.com may fetch a premium if nothing more than for the hype surrounding the digital music format MP3. However, there are limitations to MP3’s quality vs. others that are worth noting. More later on that.
Interliant provides Web hosting for 37,000 customers and 1998 sales were $4.9 million. Besides hosting it offers co-location and software rental services.
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