Internet IPOs Back In The Saddle

A week after a precedent-setting day for Internet IPOs, two new
offerings will test the roiled waters.

Web services vendor iXL Enterprises and Internet broker
onlinetradinginc.com priced shares Wednesday. iXL began trading just before noon and was up 7-23/32 to 19-23/32 in mid-afternoon trading. Onlinetradinginc.com should begin trading later
Thursday.

While the one-week drought between Internet IPOs included a holiday
weekend, it’s still the longest dry spell for ‘Net stock debuts since
March, when the market had to wait seven days between RoweCom (March 9)
and FlashNet Communications (March 16).

Internet IPOs were red-hot back then. Since then the market has cooled
considerably toward new Internet stocks. That point was brought home
last Thursday when five Internet companies launched IPOs, the most ever
in one day. Three of the offerings – from ZipLink, Juno Online Services
and EDGAR Online – had among the worst first-day performances of the
year.

The other two, from DLJdirect and StarMedia Network, fared better but
bore little resemblance to the rocket blasts that almost had become
expected of ‘Net IPOs. (Though both since have seen their share price
rise well above their respective first-day closes.)

It looked like Web broker onlinetradinginc.com was going public three
weeks ago, and was on record as having priced shares. But company
officials said its May 12 SEC filing was misinterpreted. (See When
A Pricing Isn’t A Pricing
.)

So too has the market been waiting for iXL, which reportedly backed out
of an S-1 filing at the 11th hour last fall and, after registering with
the SEC in February, delayed a planned offering in April.

With Wednesday’s pricing, however, all systems now appear to be go for
Atlanta-based iXL (IIXL). The company is offering 6 million shares at $12 each in hopes of raising $72 million.
Underwriters for the offering are Merrill Lynch, Donaldson, Lufkin
Jenrette (parent company of DLJdirect), BancBoston Robertson Stephens
and SG Cowen.

Founded in March 1996, iXL provides clients with a range of Internet
services, including strategic consulting, Web site development and the
design and implementation of e-commerce systems. It targets large
corporations and counts among its customers Time Warner and Chase
Manhattan.

Like USWeb/CKS, iXL built its reservoir of skills and expertise by
buying up smaller companies. This acquisition, or “roll-up,” strategy
has led to an accumulated deficit of $84 million through March 31, a
good-sized hole to dig out of. (Revenue in 1998 was $64.8 million,
against a net loss of $48.9 million.)

Also, with 1,475 employees scattered around the United States and
Europe, iXL faces formidable growth and integration challenges for a
company trying to sell customers on its ability to deliver a range of
services efficiently and synergistically.

A couple of months ago iXL would have been a good bet to soar from the
opening bell. But with a newly skeptical market and a slew of
higher-profile competitors (USWeb/CKS, Razorfish, Scient), iXL’s IPO
will have to fight for its right to party.


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