This IPO Goes to Show: ‘Dot-com’ Is No Magic Bullet
In a glaring reminder that not all Internet-related stocks are created equal, San Diego-based Comps.com Inc. on Wednesday became the first U.S. company with a “dot-com” name to have its shares fall on its first trading day, according to Securities Data Co.
Shares of Comps.com, which provides real estate information, were sold at $15 apiece in their initial public offering, then fell as low as $13 as trading began. The stock, with a ticker symbol CDOT, closed down 75 cents at $14.25 on Nasdaq.
“This is a wonderful lesson for investors. One cannot go into the IPO market and buy just because there is a ‘dot-com’ in the name,” said David Menlow, head of IPO Financial Network, a data service in New Jersey. “Comps.com had too much of a real estate component and not enough Internet.”
Founded in 1982, Comps.com provides data on commercial property, with less than 10% of its revenue tied to Internet business. Originally called Comps InfoSystems, the company changed its name to Comps.com in January, according to its IPO documents.
Comps.com lost $2.4 million in 1998, compared with a loss of $10.9 million the previous year. Revenue rose to $13.1 million, compared with $10.9 million in 1997.
Analysts said the company had hoped to capitalize on the success of so many other recent Internet IPOs, some of which have seen their shares jump 100% or more on their first trading day.
Comps.com’s poor stock performance might also be linked in part to the firm’s lead underwriter, Volpe Brown Whelan & Co., a regional investment banking firm based in San Francisco, analysts said. Volpe was lead underwriter last year on just two IPOs, which are trading down an average of 35.2% from their offering prices, according to Securities Data. Volpe bankers could not be reached for comment.
“People want to see Internet IPOs come from underwriters who are seasoned. If this deal had come from Morgan [Stanley], the stock most likely would have done better,” Menlow said.
Comps.com shares were priced by Volpe Brown on Tuesday at $2 above the top of the firm’s original $11-$13 expected range. The company sold 4.5 million shares, raising $67.5 million.
Comps.com executives could not comment because they are in the “quiet period” imposed by the Securities and Exchange Commission directly before and after any first-time stock offering.
Despite Comps.com’s setback, the rest of the Internet sector rallied Wednesday after several days of steep declines.
And two other Net stocks had strong debuts. NorthPoint Communications (ticker: NPNT), a San Francisco firm that provides high-speed Net access, was priced at $24 a share and soared nearly 70% to close at $40.25 on Nasdaq.
Silknet Software (SILK), a Web-interaction software provider, went public at $15 and zoomed to close at $35.13, up 134%, though it was as low as $15.63 in early trading.
