Where Are They Now? – Frontline and Verio

So far this month 11 Internet companies have gone public, with another –
Web broker onlinetradinginc.com – set to launch on Thursday.

It’s a far busier May than was last year’s, when only three Internet
companies hit Wall Street. Two of them – Frontline Communications and
Verio – are ISPs, each of which has provided good value to date for
investors. Let’s look a little more closely at where both stocks have
been and where they are today.

The Regional ISP That Could

Frontline Communications slipped quietly onto Wall Street on May 14 last
year, offering 1.6 million shares at $4 apiece. So fervent was demand
for Frontline stocks from underwhelmed investors that FCCN shares ended
the opening day at $4.88. Small-cap stuff all the way.

But if you were an investor who bought Frontline at any time last year
(especially from August through November, when the stock groveled
between $2 and $5), Thurday’s opening price of $13.13 looks pretty good.
If you had snagged shares at $2.13, the stock’s low price to date, and
cashed out today, you’d be looking at a 516% return on investment.

Based in Pearl River, N.Y., Frontline provides Internet access –
including high-speed Digital Subscriber Line and e-commerce services –
to small businesses in the Northeast. It currently has 15,000
subscribers.

Revenues in 1998 were paltry – about $600,000. Meanwhile, ’98 losses
totaled $1.7 million. In the first quarter of this year, however,
revenues increased by 438% over Q1 ’97, reaching $656,857. Losses also
increased dramatically, rising to $1 million from $110,962 in last
year’s Q1.

Verio’s Recent Run-up

National ISP Verio had some heavyweight backing behind its May 12 IPO,
attracting as underwriters Salomon Smith Barney, Credit Suisse First
Boston and Donaldson Lufkin Jenrette.

Still, its first-day performance – finishing at $27.06, just 18% above
the $23 offer price – was modest by 1999 standards. Worse, Verio’s stock
price couldn’t get above $30 per share for virtually all of last year,
and dropped as low as $13 in late October.

That all changed in early March, when Verio announced a co-branding deal
with AOL in which the company would become the exclusive Web host
provider for a number of AOL’s online business properties.

While the partnership will cost Verio at least $42.5 million over time,
investors liked the upside of an association with AOL and sent share
prices soaring to as high as $78 on April 12. Verio’s stock, whichtrades under VRIO, opened Thursday morning at $73.

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