This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Consonus IPO Has Too Many Cons

IPO investors who didn't like Rackspace (RAX) should take a close look at its rival Consonus Technologies.

It may make them feel better about Rackspace.

Consonus was expected to debut on the Nasdaq two weeks ago, but a turbulent stock market and a rocky listing for rival Rackspace gave underwriters pause. The company is now looking to list its stock in the next couple of weeks with the ticker DCTI.

It's been a long road for Consonus. The Cary, N.C.-based company first filed for an IPO back in May 2007, aiming for a fall offering of 6 million shares priced between $7 and $9 each. In June 2008, it revised its offering down to 3 million shares priced between $8 and $10. The overall amount raised in the offering would be reduced to a midpoint of $27 million from the originally hoped-for $48 million.

Like Rackspace, Consonus is in a thriving area. The market for Web-hosting of IT services is seeing strong growth, as is the technology consulting that Consonus also offers. The breadth of Consonus' services is broad enough to compete with giants like IBM (IBM), Hewlett-Packard (HPQ) and EDS (EDS).

Unlike those giants, Consonus focuses on companies with 300 to 2,000 people as well as universities. Its clients include shipping company Maersk, software company Red Hat (RHT), Blue Cross Blue Shield Association and Johns Hopkins University.

Over the past year, while Consonus has languished in the IPO queue, its valuation seems to have shrunk dramatically. Last September, Consonus said an offering would leave 10.5 million shares outstanding. At the proposed $8 a share, that's a valuation of $84 million. After a reverse stock split in January, Consonus will have only 6.2 million shares outstanding after an IPO. At $9 a share, the company is now valued at $55 million.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,915.07 -70.54 -0.42%
S&P 500 1,964.68 -8.15 -0.41%
NASDAQ 4,396.2040 -22.83 -0.52%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs