A Robust IPO for Neoforma.com
It may be a new year, but the IPO market partied Monday like it was still 1999.
Santa Clara, Calif.-based Neoforma.com Inc., whose Web sites connect medical equipment firms to hospitals and doctors, quadrupled as trading of the first major initial stock sale of 2000 began, bucking the broad market’s downward trend.
The stock (ticker symbol: NEOF) surged $39.38 to close at $52.38 on Nasdaq, giving the company a market value of $2.95 billion.
Neoforma.com’s surge on a day when so many U.S. stocks tumbled suggests investor enthusiasm for initial public offerings by online companies is as strong as it was last year, when IPOs rose an average of 90% in their first day.
“There is very good demand for Internet companies with good business models and with some barriers to entry [competition] and [that have a strong] brand,” said Lawrence York, manager of the Www.Internet Fund in Lexington, Ky.
Neoforma.com sold 7 million shares at $13 each, raising $91 million. The sale of the 12% stake is the first U.S. IPO to surpass $10 million since Dec. 16. (Last week, battery maker Talisman Enterprises Inc. [BATT] raised $4.5 million.)
Neoforma.com has strategic alliances with companies such as VerticalNet Inc. (VERT), a manager of Internet sites where businesses buy and sell goods, and Healtheon/WebMD Corp. (HLTH), the leading online provider of health-care services and information.
That “positions them well,” York said. Neoforma.com “is right on target with the whole procurement wave.”
Many Internet IPOs surge when they begin trading because they sell relatively small stakes, so demand often outstrips supply.
The initial first-day surge is, of course, no guarantee of future success. Some well-publicized Internet IPOs have peaked in the first weeks or months of trading only to fade thereafter.
Online retailer Value America Inc. (VUSA), for instance, has lost about 90% of its value from its April 8, 1999, first-day trading close.
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Mixed Message
Investor bullishness remains high, according to the latest Index of Investor Optimism survey by PaineWebber Group and the Gallup Organization, released Monday. The poll of more than 1,000 individuals, taken Jan. 6-12, found that more than 80% expect stocks to rise in the coming months, but also that they expect a smaller average return over the next year. Analysts say high optimism can be a danger sign for the market, because it can signal a market top. But PaineWebber’s Mark B. Sutton said, “It is encouraging . . . to see investors moderate their expectations.”
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Source: PaineWebber Group
