Broadcast.com Sets Record for 1st-Day Trading

In the latest gravity-defying initial public offering of Internet start-ups, shares of Broadcast.com Inc. on Friday skyrocketed to more than four times the initial offering price on their first day of trading.

That gave the Dallas-based company, whose technology broadcastsaudio and video programming to computer screens over the Web, including NFL Super Bowls and Stanley Cup playoffs, the sharpest percentage rise for an IPO ever, according to Securities Data Inc., which tracks stocks.

Shares of Broadcast.com rocketed from their $18 offering price to a high of $74 on Nasdaq before closing at $62.75--still up a staggering $44.75, or 248%. That edged out the gains for Secure Computing Corp., which gained 247% on its first day of trading in late 1995, according to Richard Peterson, an analyst at Securities Data.

The frenzied reception by Wall Street might seem to defy logic given that the company, formerly known as AudioNet, posted a loss of $6.5 million in 1997 on revenue of $6.9 million. Then again, this is the Internet, where analysts and investors have come to expect multibillion-dollar valuations on companies with no hint of profits.

At Friday’s peak price, the fledgling company boasted a market valuation of more than $1.25 billion, lending ammunition to those who argue that stock prices for Internet companies have gotten out of hand.

“Broadcast.com should never have traded at $74. It’s hard to call that fairly valued,” said Vincent Slavin, an IPO analyst at Cantor Fitzgerald Co. He said something in the $30-to-$40 range would be more appropriate.

The stellar performance of Broadcast.com’s IPO highlights the passion investors have for many Internet stocks--partly as an alternative to weaker-performing IPOs in other industries--and media companies making investments in the Web, some industry watchers said.

“I’m trying not to look at the markets all day so I can keep my capital envy to a minimum,” said Joshua Harris, founder and president of Pseudo Programs Inc., a New York-based competitor of Broadcast.com. “It makes me edgy, but I’m happy for them,” he said, referring to his rival’s stock offering.

Harris said Pseudo hopes to go public early next year.

“I think their IPO is doing so well because Wall Street has figured out that television is hitting the Net,” he added, noting the equity investment that companies such as NBC and Walt Disney have made in their own Web sites and in partnerships with other content-oriented sites.

Broadcast.com will face challenges. In the short term, “the limited bandwidth available . . . makes downloading slow and clarity poor, [and that] makes it more difficult to attract a wider audience,” said Ryan Jacob, the portfolio manager of the Internet Fund and director of research at IPO Value Monitor.

Also, in the future, the company may have trouble getting content. “Right now, it’s relatively easy to obtain Internet broadcast rights, but that may change over the next few years,” Jacob said.

Broadcast.com’s programming includes more than 345 radio stations and networks, 17 television stations and cable networks, and game broadcasts and other programming for more than 350 college and professional sports teams, the company said.

It also broadcasts business-related events such as news conferences, trade shows and stockholder meetings for clients including the American Bar Assn. and Intel Corp.