Real McCoy? VeriSign Debuts With High-flying IPO

More and more tools pop up to verify you are you. They can clone sheep
can’t they? So you never can be sure who anyone is, especially on the
Internet, where
e-mail addresses are as configurable as Gumby after a bout in the microwave.


So here comes VeriSign, the digital certificate company that issues little
files that embed in your e-mail or documents–a digital ID. Wall Street
bought into it on Verisign’s Friday IPO, priced at $14 and closed Monday at
$31.


Our number crunching shows VRSN valued at more than 45x estimated
1998 revenue. Can you say Yahoo! of Internet ID? The offering price at $14
was above the range, they had expected $12. But with such a run out of the
gate, perhaps VeriSign left some money on the table?


VeriSign IPO Valuation Estimates




















































































































































VeriSign

 

Pro forma IPO valuation estimates

VRSN

 

 

Offering

3.00

Greenshoe

0.45

Total offer

3.45

IPO offering price

$ 14.00

IPO gross proceeds

$ 42.00

 

 

Shares out pro forma

20.15

Plus options @ $2.95 wtd. Avg.

2.52

Plus incentive stock options

3.06

Fully-diluted shares (FDS)

25.73

IPO market cap

$ 360.22

Plus long-term debt


Less cash

$ 44.37

Less warrant inflow

$ 7.43

= IPO enterprise value

$ 308.41

VRSN close 2.02.98

$ 31.00

= Enterprise value FDS

$ 745.81

% Difference from IPO

121%

Revenue

 

1997

$9.38

Projected 1998 revenue

$16.50

 

 

Loss

 

1997

-$19.20

Primary share loss to 9/30

-$1.13

 

 

Revenue multiple

 

IPO enterprise value/est.1998 revenue

19

2.02.98 Enterprise value/est.1998 revenue

45

 

 

all figures in millions except

 

multiple and share prices

 

© 1998 Mecklermedia

 



Here’s the list of heavyweights tossing their names in VeriSign’s hat:
AT&T, British Telecommunications, Cisco, Microsoft, Netscape, Network
Associates (formerly McAfee), RSA Data, Security Dynamics, VeriFone, and
VISA. All support it as a method for Internet users to provide some sort of
electronic credential in the digital world.


VeriSign says it’s issued more digital certificates than any other company,
more than 2 million of its Digital IDs for individuals and over 40,000 of
its Digital IDs for Web sites.


It also provides turnkey and custom solutions for firms such as Dow Jones,
NationsBank, NOVUS/Discover, and VISA to conduct trusted and secure
communications and commerce over IP networks.


Fueling the investor furor for Verisign’s (NASDAQ:VRSN) offering was its
belief that there is the potential need over time for hundreds of millions
of digital certificates to be issued and managed.


The emergence of some tool to add veracity to the wildness of the Web
brings with it many rivals. Entrust Technologies, GTE CyberTrust
Solutions, and IBM also do the digital ID thing. The theory is that the
hundreds of billions of dollars expected in e-commerce in a few years will
require not trust but lack of trust. Without it you need things like
Digital IDs.


And that’s if everyone buys into the idea of an ID and one
that actually says someone is who he or she really is. How do I know the
digital ID is authentically portraying me? Do we need an ID to verify the ID?


Example from another electronic medium: Millions of phone calls are made
everyday
around the world, and there’s literally nothing verifying that the caller is
the caller except one important aspect: voice recognition.


If the caller happens to know the other one and the voice registers then
voila. But we’d estimate that billions of dollars of commerce are conducted
via telephone everyday–and on home shopping TV–without any
verification system in place. Call in and use your credit card number, two
complete strangers do the transaction. Done. Where’s the check and balance
in that?


VeriSign offers many layers of products in the ID lineup: servers, e-mail,
personal, developers, financial institutions. For individuals it works like
this, you sign up for a Digital ID plan and pay the corresponding fee:


Full Service Class 1 Digital ID: Sign and encrypt e-mail–Quickly
retrieve anyone’s Digital ID using Netscape Messenger or Microsoft Outlook
Express. Use Digital ID to register at participating Web sites in one
easy step. Includes US$1,000 of NetSure protection against economic loss
caused by
corruption, loss, or misuse of your Digital ID.


Access: VeriSign Customer Care 24 hours a day, 7 days a week–that’s
$9.95 a year. Plan 2 offers more for $19.95 year. Plan C is a free
trial.


If you want to make sure you’re really you. The question is, is
VRSN a 45x revenue stock? Awaiting verification.

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