Interesting article.
Internet IPO market still looking lethargic
By Bambi Francisco
Last Updated: 4/5/2005 1:53:15 PM
SAN FRANCISCO (MarketWatch) -- If Fastclick is any guide, the market for new Internet offerings isn't frothy.
Pricing at $12 last week, Fastclick (FSTC) saw shares trade below that debut price for the second consecutive day. The stock traded at $11.31 in recent dealings Tuesday.
Fastclick, an advertising agency specializing in online placements, isn't the only IPO of the class of 2004 and 2005 to break below its offering price.
Shopping.com (SHOP), which priced at $18 back in October 2004, saw shares shoot up to $33.42 back then. On Tuesday, Shopping.com's shares traded at $17.66.
Hurray Holding (HRAY), which sells wireless phone service in China, priced its shares at $10.25 earlier this year. It traded at $9.31 Tuesday.
To be sure, Google (GOOG), which priced at $85 a share in August 2004, is one of the notable 2004 IPOs that's defying this trend. GuruNet (GRU), which operates Answers.com, priced at $5 and trades near $20 now.
Marchex (MCHX), which priced at $6.50 and now trades above $18, Greenfield Online (SRVY), which priced at $13 and now is at $20.10, are other recent Net deals that are above their offering prices, according to Dealogic.
Still, many Internet IPOs like Fastclick are languishing. Motive (MOTV) priced at $10 and trades at $9.92 Tuesday; PlanetOut (LGBT) priced at $9 and traded at $8; FairPoint (FRP) traded at $15.05 after pricing at $18.50.
What gives? For starters, publicly traded online-media companies aren't doing so hot.
As for Fastclick, it went out at a multiple that was comparable to publicly traded companies, rather than a discount, observers say. Fastclick went public at a price-to-trailing-earnings of 50, whereas ValueClick trades at 22 times last year's profit.
Typically, IPOs are offered at a discount to attract investors.
Additionally, these deals aren't large enough for money managers to take a meaningful position. "I've heard that they were so small that many funds just don't have enough of a position to dig in and care, so they punt," said Shawn Milne, an Internet analyst at Friedman, Billings, Ramsey & Co.
How can you be bearish and raise numbers?
Google traded up 2 percent to $188 on Tuesday, following an upbeat report from Lehman Bros. See full story.
At the same time, RBC, the brokerage firm that came out with a bearish call on the stock a month ago, stuck to its guns. The title of its report read, "Sticking With Our Thesis, Now With Broader Channel Checks."
Of course, it's hard to read this report as bearish when the RBC analyst raised his estimates for Google. In the report, the firm raised Google's first-quarter net revenue to $712.7 million from $685.8 million. Earnings were raised to 88 cents a share from 87 cents.
Copyright ©2005 MarketWatch, Inc. All rights reserved. Please see our Terms of Use. MarketWatch, the MarketWatch logo, and BigCharts are registered trademarks of MarketWatch, Inc."
