Web Ad Firm Holds IPO Despite Pending Suit
Santa Monica-based L90 Inc. (ticker symbol: LNTY), a Web advertising and marketing company, goes public today, betting investors will shrug off legal action from its largest competitor that some analysts say could run it out of business.
DoubleClick Inc. (DCLK), the No. 1 online agency with billings last year of $317 million, is suing its smaller rival, claiming it has violated patents.
But L90 and lead underwriter SG Cowen pressed ahead with the Southland’s first IPO of 2000, wagering the suit will come to nothing and the company will prosper in an industry that, according to analyst Daniel MacKeigan of Friedman Billings Ramsey, could reap $40 billion in billings by next year.
L90 sold 6.5 million shares at $15 on Thursday, raising $97.5 million, after hiking the target price to $12-$14 from $10-$12 due to demand.
MacKeigan predicts advertisers will place at least 10% of their $400 billion in ad spending over the Web in 2001. “L90 is doing well and investors are pretty eager to hop on any of these Internet companies that are going after large opportunities,” he said.
DoubleClick, already facing increased competition from the likes of CMGI Inc. (CMGI) and 24/7 Media Inc. (TFSM), is also suing Sabela Media Inc., which is being bought by 24/7.
DoubleClick claims L90 and Sabela are copying the technology of its patented Dart system. It says they should pay license fees for the technology that sends ads to a user’s browser.
“If DoubleClick is successful in its claims against us, we may be hindered or even prevented from competing in the Internet advertising market and our operations would be severely harmed,” L90 warned in its Securities and Exchange Commission filing. But, L90 said, “We currently believe that this lawsuit and its outcome will not cause any material harm to our business.”
Although L90 is dwarfed by its bigger rivals, amassing billing revenue in its first three months of $9.3 million, investors “will want to own this,” MacKeigan said. “Wall Street has been quite enamored with 24/7, DoubleClick and CMGI.” Those stocks are up 77%, 357% and 338%, respectively, in the last 12 months.
In other IPO news:
* Emeryville, Calif.-based Extensity Inc. (EXTN), which makes software that companies use to track employee expense accounts, more than tripled in its trading debut Thursday, the second surge by an Internet offering this week. The stock jumped $51.25 to $71.25 on Nasdaq, giving the company a market value of $1.62 billion. Analysts said the system is popular with clients such as Sara Lee Corp. and Cisco Systems Inc. because it can be used by employees equipped with laptop computers when they are outside the office. On Monday, health site network Neoforma.com Inc. (NEOF) quadrupled in the year’s first major debut. The gains by Extensity and Neoforma easily top the first-day rise of 90% on average by Net IPOs last year.
* Boston-based John Hancock Financial Services Inc. (JHF) got a muted reception as the 137-year-old insurer started trading after a $1.7-billion offering. The stock rose 63 cents to $17.63 on the New York Stock Exchange, giving the firm a value of $5.8 billion. Early gains are often modest with such giant IPOs.
* Digital wireless service provider Nextel Partners Inc. of Kirkland, Wash., filed for a $447-million IPO. It plans to sell 23.5 million shares at $15-$19 and trade on Nasdaq under the symbol NXTP.
