8 of 11 Firms, ‘Traumatized’ by Volatile Week, Delay IPOs
An outbreak of cold feet swept through the initial public offering market on Friday as eight of 11 companies poised to debut postponed their stock sales--rather than risk a poor reception from investors.
Friday’s calendar of offerings, loaded with Internet-related companies, was pared down after a week of sharp declines in most Net stocks.
Those that withdrew included Women.com Networks of San Mateo, Calif., floral delivery service FTD.com, and mortgage services firm Mortgage.com.
“Those companies planning to go public today are kind of traumatized by what’s happened this week,” said Jay Ritter, a University of Florida finance professor who specializes in IPOs.
“The IPO market, whether we’re dealing with the Internet or any industry, has always been sensitive to market movements,” he noted.
Most of the companies will probably attempt to go public next week, barring an even more severe downturn in the market overall, analysts said.
Investors’ appetite for IPOs--especially offerings by any company with a name ending in “.com”--has been waning in recent weeks as a glut of new issues has hit the market.
Three Net-related companies that priced their IPOs late Monday, including the eagerly awaited 1-800-Flowers.com, were shocked to see their shares fall below their offering prices when they began trading on Tuesday.
1-800-Flowers sold its shares at $21 and fell to $18.19 on Tuesday. By Friday it was at $17.
But enthusiasm for Net IPOs appeared to revive on Thursday when Internet Capital Group, a Net venture investor, doubled its offering price on its first day of trading. Also, Homestore.com, a Thousand Oaks-based real estate information provider, went public at $20 and closed at $22.75 Thursday.
Those gains came amid a sharp rebound in Net stocks in general on Thursday.
But Friday brought a renewed dive in the market and in most major Internet names.
Three companies did go forward with their IPOs on Friday--and got a tepid response:
* Datalink Corp., a Minneapolis-based builder of data storage devices, priced its shares at $7 and closed at $7.69 on Nasdaq.
* Tumbleweed Communications of Redwood City, Calif., sold 4 million shares at $12 each. The stock immediately fell to $11.25 when trading began, but closed at $12.06. The company creates secure e-mail systems for corporations and government agencies.
* Internet Gold, Israel’s leading Internet service provider, priced its shares at $12 and closed at $11.94 after rising as high as $16.88.
Those results contrast with spectacular IPO openings that became almost routine during much of 1998 and early 1999.
Ariba Inc., a Sunnyvale, Calif., company that helps businesses track sales over the Internet, had the quarter’s best opening. Ariba rose 291% from an offering price of $23 to $90 on June 23. The stock is a $86.40 now.
EToys Inc. of Santa Monica jumped 283% from $20 to $76.56 on May 20. But it has since slid to $33.
Analyst Corey Ostman of Ostman’s Alert IPO, a Santa Monica-based IPO tracker, said a big problem is that many new investors who have tried to ride the IPO boom have expected too much. Thanks to the great performance of some stocks, openings that once would have been respectable are now considered disappointments.
“People got used to the idea of doubling or tripling at the opening,” Ostman said. “Historically, the pop has been 10% to 20%. People have forgotten about that.”
Even with Friday’s postponements, it’s impossible to tell whether the IPO boom is dead, or just in a temporary down cycle, said Ivo Welch, a UCLA finance professor who tracks the IPO market.
“It’s very difficult to predict where the Internet stocks are going to be three months from now. If they come back, we’ll see a lot of Internet IPOs,” he said.
Companies on the calendar for next week include US Interactive, InterWord, Cybergold, Interactive Intelligence, Bamboo.com, Tunes.com and Yesmail.com.
