IVillage Becomes a Metropolis on First Trading Day
IVillage Inc.'s stock more than tripled Friday on its first day of trading, as the online women’s news and entertainment service capitalized on the seemingly never-ending enthusiasm surrounding technology IPOs.
In one of the spring’s most anticipated initial public offerings of technology stocks, IVillage closed at $80.13 per share, 234% above its $24 offering price and 16% below the $95.88 bid that opened public trading on Nasdaq. Its shares dipped as low as $78 and rose as high as $100.
“They are the first one to come public, and that will be the benchmark for other sites that are demographically targeted for the women’s market,” said David Menlow, president of IPO Financial Network in Millburn, N.J.
On Thursday, the company sold 3.65 million shares, or a 16% stake, to the public, raising about $87.6 million. Friday’s surge pushed New York-based IVillage’s market value to about $1.86 billion. IVillage runs a network of 14 channels that focus on topics such as work, food, relationships and travel. About 82% of its users are women, the company says.
Investors are also snapping up new shares from other Internet companies. Discount travel ticket seller Cheap Tickets Inc. more than doubled in its first day of trading Friday. Its shares closed at $31.25, up $16.25, and traded as high as $39.
IVillage’s gains were all the more impressive considering the publicity surrounding a lawsuit filed against it in January. IVillage also faces heated competition from Hearst Corp.'s HomeArts and Women.com, which announced a joint venture, dubbed Women.com Networks, early this year. The combined company posted a larger reach than IVillage in January, according to New York-based Media Metrix.
The prestige brought to the deal by America Online Inc., which owns a 10.1% stake in IVillage, helped the firm overcome these difficulties, analysts said.
“There’s a lot of muscle with AOL that negates what all of their competitors are doing,” Menlow said.
He said the offering may prompt underwriters to become more aggressive with their IPO pricing. IVillage underwriter Goldman, Sachs & Co. bumped up its offering price earlier in the week from the original $12-to-$14 range to $24, a departure in IPO pricing plans from the last few months.
In the suit against IVillage, former employee Todd L. Kenner contends the firm failed to follow through on a promise to give him stock options when he left in October after three months, said Paul Yetter, a partner at Yetter & Warden in Houston, who represents Kenner. The suit will move from Tennessee to New York soon, Yetter said.
Two weeks ago, former IVillage Chief Financial Officer Joanne O’Rourke Hindman filed court documents in connection with Kenner’s suit. These documents accuse the firm of “inappropriate” accounting practices and say it failed to provide Hindman stock options after she left that were promised when she was hired, said Yetter, who also represents Hindman.
IVillage, Women.com Networks and Geraldine Laybourne’s Oxygen Media, considered to be the major forces marketing to women online this year, have alliances that allow them to entice advertisers with online and offline opportunities. Oxygen Media is expected to put up its Web sites later this year.
NBC owns about 7% of IVillage and does cross-promotions on both NBC and Snap.com. Women.com Networks will receive promotion in Hearst’s 11 magazines, and Oxygen Media has investments from AOL, ABC and Oprah Winfrey’s Harpo Entertainment Group.
These competitors are also relying on their partnerships to drive traffic to their sites. Women now make up about 47% of the online audience, but that figure is expected to climb above 50% by 2002, according to market research firm Jupiter Communications.
Like many Internet companies, IVillage has yet to make a profit. The company lost $43.7 million on sales of $15 million in 1998, compared with a $21.3-million loss on revenue of $6 million the previous year.