US Search.com Falls 22.9% in Trading Debut
US Search.com, a public records access firm founded by a former employer of several Heaven’s Gate cult members, on Friday posted the second-worst trading debut ever for an Internet company, analysts said.
Shares of the heavily advertised Beverly Hills-based company, which sells access to records used to locate and research people, plunged 22.9% from their offering price. Analysts said the crowded market for Internet IPOs and privacy concerns over the company’s business line contributed to the tailspin.
Only Streamline.com, which fell 23.8% on its first day of trading last week, has fared worse, according to Securities Data.
Shares of US Search.com (ticker: SRCH) were priced at $9--the bottom of its expected $9-$11 range--by offering managers Bear Stearns & Co., BancBoston Robertson Stephens Inc. and Wit Capital Corp. The firm sold 6 million shares and raised $54 million in its initial offering Thursday.
But investors turned a cold shoulder when trading started, beating the stock down to $6.44 before it rose again to close at $6.94 on trading of 9.5 million shares on Nasdaq.
The 5-year-old company, spun off from Hollywood production house Kushner-Locke Co., was founded by Nick Matzorkis, who made headlines in 1997 when several Web page designers he’d employed at his other firm, InterAct Entertainment Group, died in the cult suicide of 39 Heaven’s Gate members at an estate in San Diego County’s Rancho Santa Fe.
Matzorkis inked a film production deal with Kushner-Locke and made the rounds on national television shows. But he was burned by the spotlight when Cleveland authorities recognized him as a felon who hadn’t completed his court-ordered community service work.
Matzorkis was arrested for violating the probation on his 1990 auto theft conviction, records show, but has since completed his term. He is now senior strategist for US Search.com.
Clouding the company’s trading Friday was the recent decline in prices of highflying Internet stocks such as America Online, as well as a flood of other Web-related IPOs entering the market. Friday’s debut of Juniper Networks Inc., which makes networking equipment, also overshadowed it, analysts said.
Shares of Juniper, whose ticker symbol is JNPR, rose 191% from their offering price to close at $98.88.
“Juniper just stole a lot of the thunder,” said Tom Taulli, an analyst with IPO Monitor. “I don’t know if it’s a reflection on [US Search.com]. They just got lost out there.”
Although the quantity of Internet IPOs has not let up, the quality could be thinning. Of 25 Net IPOs sold in May, 12 are trading below their offering price, according to Securities Data.
But some analysts say US Search.com could have a viable business plan, so its drop was a bit of a surprise.
“This is a difficult situation to figure out,” said David Menlow of IPO Financial Network.
“Bear Stearns is a quality firm,” he said, noting the underwriter’s recent successes such as Drkoop.com and Wit Capital, as well as all-time first-day gainer TheGlobe.com. “And the business plan [for US Search.com] is pretty solid.”
But he said investors may have been scared off by the soft pricing and because of privacy issues inherent in the online search business.
“This is George Orwell hanging over the market big time,” he said.
Juniper, meanwhile, was not the only successful IPO on Friday.
Santa Monica-based Stamps.com Inc., which allows companies to purchase postage on the Internet, rose 24%, or $2.69, to $13.69 on a volume of 6.16 million shares in its first day of trading. The company sold 5 million shares at $11 each, raising $55 million.
The stock, whose ticker symbol is STMP, was offered through BancBoston Robertson Stephens, Thomas Weisel Partners, Volpe Brown Whelan & Co. and Wit Capital.
Internet.com Inc., which owns and operates a network of Web sites for Internet professionals, was unchanged from its offering price of $14 in trading of 6.2 million shares. The Westport, Conn.-based company (ticker: INTM) sold 3.4 million shares, raising $47.6 million. U.S. Bancorp Piper Jaffray managed the sale, with assistance from William Blair & Co. and DLJDirect Inc.
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Times staff writer Josh Friedman and Bloomberg News contributed to this report.
