Loudcloud Discounts IPO Again, Puts 34% of Stock in Public Hands
Loudcloud Inc., the latest inspiration of Web trailblazer Marc Andreessen, discounted its initial public offering Thursday for a second time, dousing hopes the ballyhooed company could revitalize Wall Street’s interest in Internet businesses.
The Sunnyvale, Calif.-based Web services firm set its IPO price at $6 a share, half the price the company originally hoped to get.
At the same time, to make sure it raises enough money to stay in business, Loudcloud increased the amount of stock to be sold by 25%, to 25 million shares, raising $150 million before fees.
By selling more shares, Loudcloud is putting 34% of its stock in public hands. The company originally planned to sell a stake of less than 10%, retaining the rest for management and key investors who helped fund the firm’s start-up.
Loudcloud’s investment bankers, Goldman, Sachs & Co. and Morgan Stanley Dean Witter & Co., planned to complete the IPO Thursday night and begin trading its shares on Nasdaq today under the ticker symbol LDCL.
The deal ran a day behind its original schedule, a delay investment bankers attributed to this week’s bad weather in the East.
The IPO price markdown to $6, from an estimate of $8 to $10 earlier this week and an original estimate of $12, was a clear sign Loudcloud was having trouble finding investors willing to take a risk on its unprofitable business, despite Andreessen’s drawing power.
Andreessen, 29, became revered as an Internet visionary after founding Netscape Communications, whose Web browser and 1995 IPO helped spawn the “new-economy” tech stock boom that has busted over the last year.
After co-founding Loudcloud with three other Netscape refugees in September 1999, Andreessen hoped to build another breakthrough Internet business. The company helps build and maintain the Web sites of other firms, a contracting service that is expected to grow robustly as e-commerce expands.
But with even the best-known Internet stocks such as Yahoo more than 90% off their 52-week highs, investors are putting profits ahead of pedigree.
“No one wants to sip from a punch bowl that has been filled with hemlock for the past year,” said David Menlow, president of IPOfinancial.com.
Coming off a net loss of $107.6 million in the nine months ended Oct. 31, Loudcloud remains a long way from turning a profit. The company probably won’t make a profit until 2004, according to Merrill Lynch analyst Bob Stimson.
In the meantime, Loudcloud is burning through cash. Loudcloud’s determination to pursue its IPO despite Wall Street’s cold shoulder suggests that the company is desperate to raise more money, said analyst Kyle Huske of IPO.com.
After raising its final round of venture capital last June, Loudcloud’s market value exceeded $600 million. Based on its IPO price Thursday, the company is now worth about $440 million.
