Value Found Close To The Ground

Maybe investors should start wearing shades. Once again an Internet company has lit up the Wall Street landscape with
a stratospheric IPO.

The rocket’s red glare in this case comes from
“name your price” reverse-auction Web site proprietor,
whose stock opened Tuesday at $81a share – more than five times its $16
offer price — before closing at $69.’s is just the latest spectacular debut in a wild quarter
for Internet IPOs. Today we’ll look at the most significant of the 26
Internet IPOs launched so far this year and how some of them are
performing now.

In terms of both total dollars raised by Internet IPOs and their opening
price, Q1 has been unprecedented. raised $160 million with
its share offering, dwarfing amounts raised by Internet stock legends
such as ($54 million in May 1997), eBay ($63 million last
September) and Yahoo! ($33.8 million in March ’96).

But didn’t even raise the largest amount of money through
an IPO in the past week. On March 25, rural ISP grabbed $187
million with an offering of 8.5 million shares, the highest ever for an
Internet company. (And a record that could be broken today, since ZDNet, which began trading today, priced 10 million shares at $19.)

Here are the biggest money makers among Internet IPOs in Q1 alone:

  • — $187 million
  • — $160 million
  • Covad Communications — $140 million
  • Prodigy — $120 million
  • Critical Path — $108 million
  • — 103.5 million

Now let’s look at opening price, another area where previous standards
are being rendered meaningless.
Here are the Internet companies whose IPOs have opened highest so far in

  • IVillage (March 19) — $95.88
  • MarketWatch (Jan. 15) — $90
  • Pacific Internet (Feb. 5) — $88
  • Modem Media (Feb. 5) — $55.63
  • (Feb. 26) — $55.25
  • (March 26) — $52.75
  • (March 24) — $52

Kicking yourself for not getting in early on these hot Internet stocks?
Relax. The runner who sprints to an early lead in a marathon often has
trouble keeping up the pace. Sure, iVillage and are still
above those first-day numbers (opening today at $99.75 and $75.25,
respectively), but they’ve just entered the fray. And, another
relative newcomer, opened today at $58, slightly above its debut trading

Meanwhile, the three oldest IPOs listed above have lost altitude.
MarketWatch, for example, opened today at $73.13, nearly 19% below its
Jan. 15 open, and 25% below its first-day close of $97.50. Also today,
Pacific Internet opened at $48 (45% below its open), Modem Media
opened at $43 (down 23%) and was at $39.50 (25% down). All this in what has been a red-hot Internet
stocks market.

Let’s flip it around now and look at the Internet IPOs with the lowest
opening trade prices this year. They are:

  • Digital Lava (Feb. 17) — $6.75
  • Prodigy (Feb. 11) — $20
  • NEON Systems (March 5) — $21.25
  • Intraware (Feb. 26) — $21.31
  • (March 23) — $21.63
  • Healtheon (Feb. 11) — $21.88

Rather modest openings, especially since apparently we’ve entered the
era of the $20-plus offer price. However, as of today, every one of
these bottom-feeders offer better value to early investors than the
rocket ships, based on the first-day opening price., for example, opened today at $33.94, 57% above its
first-day price (though below its $40 first-day close). Here’s how the
others opened today and how it compares to their IPO open:

  • Digital Lava — $11.94 (up 77%)
  • Prodigy — $39.50 (up 97.5%)
  • NEON Systems — $51.81 (up 144%)
  • Intraware — $41.13 (up 93%)
  • Healtheon — $45.63 (up 109%)

Obviously all these figures represent a snapshot in time, and things can
change dramatically. But as of today, the companies that made the most
unassuming ticker debuts so far this year are outshining the Internet
stocks that blazed across the sky.

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