Nearly every week seems to mark the birth of at
least one new tech IPO star, but a close look at recent debutante
Constant Contact shows that not all are
burgeoning with the same promise.
Constant Contact has spent years building up a
strong business and market footing in an
overlooked sector. Its reliance on a Web-based, on-demand
product seems to resonate among not-so-tech-savvy
clients who want an easy way to keep in touch with their own customers.
Like
iMergent, whose
stock has been volatile over the past couple of years,
Constant Contact offers a hand-holding relationship to small companies, from wine stores to individual "power sellers" on
eBay, allowing them to use a browser to send email updates and newsletters to contact loyal customers.
And that,
combined with the popular on-demand model, seemed to be
enough to drive the company's stock to $30 the day after
its debut last week, nearly double its offering price
of $16. It's only the latest in a host of tech companies to have
gone public since August and see their stock rise more
than 50% on the first day.
The stock was trading recently at $26.19, off 2.8%.
But there are some factors that make the
high post-IPO valuation seem puzzling: Despite its
lengthy history, the company is still posting losses,
and rather than benefiting from the economies of scale
that other on-demand companies are seeing, some costs
are rising.
Kevin Kelleher
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