Many Internet Companies Drained From IPO Pipeline

Back in late May I wrote that we could see more Internet companies bail
out of planned IPOs because a glut of offerings and a downturn in ‘Net
stock prices was hurting first-day performance.

While the Internet IPO pipeline may not have thinned – companies just
keep on filing those S-1s, and each month brings a new record for ‘Net
IPOs – the number of firms postponing or withdrawing their initial
public offerings has grown six-fold since May.

Through the end of that month, only two Internet firms, WebMD and
musicmaker.com, had changed plans regarding their IPOs. (Online
healthcare information and services provider WebMD, of course, merged
with Healtheon, while Internet music e-tailer musicmaker.com revived its
IPO bid, going public on July 7.)

In the past two months, though, at least 10 Internet companies have
refused to make the jump. A number of these delays have come in the last
few days alone, and include GreatFood.com, HealthGate Data, Women.com
Networks
, FTD.com, Medscape, Interactive Intelligence and Webstakes.com.

This trend is no surprise, since Internet IPOs have fared even worse in
the current slump than they did during the spring correction. The vast
majority of Internet IPOs in August have ended their first-day of
trading near or even below their respective offer prices. Rather than be
part of the carnage, an increasing amount of companies would rather live
to launch another day (preferably last March).

The strangest case is HealthGate, an online health information source
that filed to go public nearly four months ago and has been expected to
make its Wall Street debut since early July. (I even recall that the
company and underwriter SG Cowen priced shares back then, but I can’t
find evidence of it anywhere.)

Dow Jones News Service reported Saturday HealthGate has postponed
the offering of 4.6 million shares at $10 to $12 each, yet HGAT shares
are listed on at least one online IPO calendar to debut during the week
of Sept. 6. I’ll believe it when I see it.

Webstakes.com, meanwhile, got cold feet faster than the others. The
online sweepstakes promoter filed on June 14 to sell 3.6 million shares
at $13 to $15 before postponing its IPO last week. The company had
planned to raise $50.1 million with the offering. Now it appears
Webstakes.com will rely on the $40 million private investment it
received in the spring from [email protected], XL Ventures and 10 other
funding sources.

Like musicmaker.com, many of the companies are merely delaying their
offerings, hoping to ride a surge in Internet stocks. That may come in
the fall, but the glut shows no sign of easing up. As long as 25 or more
Internet companies go public each month — as has been the case since
May — triple-digit debuts will continue to be the exception rather than the rule.

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