GeoCities Soars in IPO Despite Nasdaq Retreat
It was a day at the beach for GeoCities, the Santa Monica-based Internet firm whose shares more than doubled in their first day of trading Tuesday despite major stock market declines.
In one of the most anticipated initial public offerings of the summer, GeoCities closed at $37.31 per share, 119% above its $17 offering price and 13% above the $33 bid that opened public trading on Nasdaq. The shares dipped as low as $30.25 in the early going and later rose as high as $39.88 before settling back to the $37 range.
The debut of GeoCities--which gives free Web pages to so-called homesteaders and pays for them by selling targeted advertising--was particularly stunning given that the tech-laden Nasdaq lost more than 2.5% of its value and the Dow Jones industrial average lost 112 points. Two other Internet-related companies, Digital River and Pilot Network Services, fared less well with their IPOs.
At GeoCities’ brick-and-stucco offices two blocks from Santa Monica Beach, employees cheered, applauded and drank champagne as they watched financial cable channels CNBC and CNN/FN on two TV screens in the conference room and followed the latest stock quotes on the World Wide Web. Executives in New York passed along frequent updates, which were relayed via cell phones, according to one employee.
Most of the company’s 114 employees own at least 100 shares of the stock, which would have netted a paper profit of about $20 a share, on Tuesday.
“I feel great,” said a visibly pleased employee, who could not elaborate because the company is in a quiet period.
In the executive offices, the mood was more guarded as the company’s leaders contemplated management changes for the 3-year-old firm. GeoCities’ strong showing will certainly raise its profile, and now “every step is going to be watched carefully,” said Rohit Shukla, executive director of the Los Angeles Regional Technology Alliance.
On Wall Street, meanwhile, analysts said there was reason to celebrate.
“We’ve seen other Internet stocks come out in halfway decent markets that have not fared as well,” said David Menlow, president of IPO Financial Network in Springfield, N.J. “If the market were up 200 points, it’s scary to think where this stock could have opened.”
GeoCities’ success can’t be attributed solely to the recent Internet mania among investors, because two other Internet-related IPOs were much more subdued Tuesday, said Tom Taulli, a technology analyst for IPO Monitor in Calabasas.
Shares in Digital River, an electronic commerce firm in Edina, Minn., rose a comparatively slight $1.38 to close at $9.88 in its first day of trading on Nasdaq. Alameda-based Pilot Network Services’ shares fell 38 cents below their offering price to close at $13.63, also on Nasdaq.
“You have to be a very high-quality Internet company to do well in this market, and GeoCities is in that category,” Taulli said.
Trading in GeoCities shares was delayed for more than three hours, apparently due to concerns that it would not be well received in a falling market. When trading began at 9:30 a.m. PDT, the Dow was down about 160 points. But by the time the market closed, nearly 12 million GeoCities shares traded hands, and the company had a market capitalization of $1.14 billion.
Some analysts said that figure could rise even more by the end of the week.
“It still looks kind of cheap,” Taulli said. “I wouldn’t be surprised if it continued trending up.”
But Scott Sipprelle, a co-founder of Midtown Research Group in New York, is less optimistic about GeoCities’ long-term prospects. He said he doubts that companies will find GeoCities a useful place to advertise and predicts that Web surfers will tire of visiting GeoCities’ 2 million home pages.
“When you wake up a year from now, is this a stock that will be sustaining these kinds of values?” Sipprelle asked. “Our conclusion, frankly, is that it’s not.”
