Some May IPOs Defy Downturn

In a recent column analyzing the debut performance of Internet IPOs
launched last month, I noted that the average first-day closing price of
Net stocks that went public in May was well below the average from
previous months this year.

Now, as we head into mid-June, 22 of the 26 Internet stocks that began
trading in May are selling either around or below their respective
first-day closing prices.

But this column isn’t about those stocks. It’s about the ones that (so
far) have managed to defy the powerful pull of this spring’s Internet
market slump, a downturn that has ravaged the market caps of some of the
sector’s highest flyers and turned the Internet IPO launch pad into mush

The May IPO with the best aftermarket performance to date is that of
StarMedia Network, the New York-based, Spanish language start-up that
aspires to be the Yahoo! of Latin America. After closing at $26.06 in
its first day of trading on May 26, StarMedia quickly jumped to $45.50
on Day 2, and hit its peak close of $61.19 on June 1.

Share price fell to $40.25 only two days later, and STRM stock was
trading at $36 shortly before noon Thursday, about 38% above the
first-day closing price and 140% above StarMedia’s $15 offer price. If
the Internet market has bottomed out – and there are some indications
that it has — StarMedia could stabilize in somewhere in the $30s.

Customer management and billing software vendor Portal Software has
traded consistently in the mid-$40s (a brief late-May slide
notwithstanding) since closing on its first day of trading May 6 at
$37.38, or 167% above the offer price.

That slide came in the wake of the company’s Q1 earnings report, in
which net loss increased to $5.5 million from $2.1 million in Q1 ’98. By
the end of May, however, Portal had rallied, closing on May 28 at
$49.13. As of Thursday at noon it was trading at $45.13, or 21% above
the first-day close.

Online Visa card processor NextCard needed a boost this week from
analysts who rated its stock a “buy” or “strong buy,” endorsements that
sent shares surging to $41.38 at noon Thursday, 24% above its May 14
first-day closing price of $33.50.

Until this week, however, NextCard had spent most of its time trading
slightly below its first-day close, though well above its $20 offer

While analyst plugs often have only a short-term effect, investors’
newfound appreciation of NextCard’s first-mover status – right now it
processes about 25% of all Internet credit card applications, a market
that Donaldson Lufkin & Jenrette analyst Jamie Kiggen says could produce
$19 billion in revenue – may endure at least until the company’s next
earnings report.

Another company that launched its IPO on May 14 also is among the best
performers from that month’s class. Shares of “eBusiness” services
start-up Scient were trading at noon Thursday for $39, about 20% above
the first-day closing price of $32.63.

Unlike NextCard, Scient’s shares have traded above the first-day close
almost since its IPO, peaking on May 28 at $50.13.

In a tough market with competitors such as Razorfish and Modem
Media.Poppe Tyson, Scient has been able to attract attention, landing
itself recently on the “companies to watch” lists of publications suchas Red Herring, Upside and Silicon Alley Reporter.

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