Irony in Healtheon, Value America, and others postponing IPOs is that they
may have created a stronger demand for the few Internet stocks that dared
step onto Wall Street. Yet Internet.com’s IPODEX, which tracks Net stock
IPOs, shows that the actual turnaround for Internet IPOs happened the week
of September 17. Here’s how:
IPODEX registers the sentiment for Internet IPOs in 1998. Overall the
barometer was up for the majority of stocks in it from the IPO price. But
week to week, after the August correction hit the market, it was a
flat-to-down trend. Mid September, however, IPODEX started to stir and post
gains of 20% to 25% per week.
Meanwhile, the broad market recovered its August haircut and the overall
indicator of the state of Internet stocks, ISDEX, The Internet Stock Index,
climbed higher and higher. It’s up more than 60% in four weeks. Against
that backdrop of bullish sentiment, pending offers from Healtheon and
theglobe.com were pulled, creating a vacuum (demand) for Internet IPOs.
First one out into that dry sponge looking for liquidity? EarthWeb
(NASDAQ:EWBX), which indy investors snapped up in an orgy of buying its
first two days. It’s up 395% to $69.25 from the $14 per share offering
price November 11.
EWBX’s short-lived public life would rank it third of the group in overall
percent gain from IPO price, after Inktomi (NASDAQ:INKT) and eBay
(NASDAQ:EBAY), two category leaders, Inktomi in wholesale search and
network caching software and eBay in personal auctions (which I would call
glorified garage sales in the best sense of the meaning).
Let’s go to the table:
INTERNET.COM’S | Ticker | Share price | Share price | % change | % change |
IPO INDEX | symbol | 11/12/98 | 11/5/98 | period | from IPO |
Inktomi | INKT | $127.56 | $89.75 | 42.1% | 608.7% |
eBay | EBAY | $126.00 | $81.19 | 55.2% | 600.0% |
Broadcom | BRCM | $86.63 | $84.25 | 2.8% | 260.9% |
Broadcast.com | BCST | $51.00 | $49.38 | 3.3% | 183.3% |
Verisign | VRSN | $38.13 | $37.25 | 2.3% | 172.3% |
GeoCities | GCTY | $39.88 | $33.75 | 18.1% | 134.6% |
Exodus | EXDS | $35.09 | $33.50 | 4.8% | 134.0% |
DoubleClick | DCLK | $35.25 | $35.25 | 0.0% | 107.4% |
Netgravity | NETG | $15.63 | $11.38 | 37.4% | 73.6% |
Beyond.com | BYND | $14.63 | $14.88 | -1.7% | 62.5% |
ISS Group | ISSX | $34.69 | $32.75 | 5.9% | 57.7% |
Digital River | DRIV | $13.19 | $11.00 | 19.9% | 55.1% |
24/7 Media | TFSM | $18.44 | $15.25 | 20.9% | 31.7% |
CDnow | CDNW | $13.63 | $8.50 | 60.3% | -14.8% |
Cyberian Outpost | COOL | $15.25 | $14.88 | 2.5% | -15.3% |
EarthWeb | EWBX | $69.25 | – | – | 394.6% |
TOTAL* | 664.97 | 552.94 | 20.3% | 180.0% | |
AVERAGE* | 44.33 | 36.86 |
* excludes EWBX, not public on Nov 5
IPODEX is a product of
Internet.com, (c) 1998 Mecklermedia
We don’t count EWBX from November 5, since it wasn’t public yet. Also in
EarthWeb’s favor, Wit Capital, one of the underwriters, reportedly called
around and created a ground swell, as did a promotion EarthWeb did in
conjunction with people signing up for its ITKnowledge site.
Add to that JPMorgan’s eagerness to get one of its first “Internet” IPOs
off on a good start and BAM! there it went.
What EWBX did more than anything was highlight the demand for Internet
IPOs, hence Web community site theglobe.com stepping up with its offer
again, which begins trading today after pricing 3.1 million shares at $9
through lead underwriter Bear Sterns.
Two other Internet firms in the IPO pipeline and perhaps close to going
public any day now are directory provider Infospace and buying club
community Xoom.
In our view, any three of these deals have better fundamentals or potential
than EarthWeb’s business model and the fact that barter was booked as
revenue, a full 25% of all revenue. Scalability, revenue growth, user
numbers and overall reach on the Internet by any one of these three
surpasses EarthWeb’s, heretofore only known among the Web developer
community, its core audience for its ad-driven existence.
With the continued interest in Internet IPOs and stocks, we wanted to
highlight some of the key things to look for in an Internet IPO: Business
model, market size for its business, competition, management experience,
revenue/earnings (or earnings potential given the previous factors), peers
in the same group, leadership or pioneering in model, dependence on
technology, mindshare/brand awareness, ability to scale to meet market
demand, capital needs, overall market and general economic trends.
Oh, and don’t forget that one intangible holds weight on its own, perhaps
more than any other in some instances: the collective psyche.
