Low Skies Over the Loudcloud Offering

Updated from 1:40 p.m. ET

A year ago, the initial public offering of Loudcloud, the Web site builder started by Netscape co-founder Marc Andreessen, would likely have been met with unbridled glee. Today, its underwriters are having a hard time getting it out the door.

Late Wednesday, the company delayed the pricing of the deal by a day, saying that bad weather delayed meetings with potential investors. In fact, it appears the real reason for the delay is that potential investors considered the deal too pricey.

With the deal, according to market sources, still undersubscribed this morning, Loudcloud cut the expected price of its IPO to $6 a share from $8 to $10 a share, according to a filing with the Securities and Exchange Commission, while boosting the number of shares it expects to offer to 25 million from 20 million. That means that it will raise $150 million, whereas previously it hoped to raise $160 million to $200 million.

It did price Thursday evening at $6 a share.

To increase the IPO's appeal, Marc Andreessen is said to have committed to buying 500,000 shares at $6, while CEO Benjamin Horowitz has committed to buying 1.5 million shares. Those shares could account for up to 8% of the offering.

It worked. "They got some aftermarket buyers," says one hedge-fund manager. "Apparently there's a couple of large institutions that are willing to back them up."

In the past, the poor IPO environment might have encouraged Loudcloud to postpone not just for a day but several months. Yet with so much uncertainty, and so many technology-related companies decrying the lack of "visibility," waiting might have meant raising less cash. Less cash would mean less cushion for reaching profitability -- something that Loudcloud has yet to do.

Yet with hindsight, it is probably a good bet that Loudcloud will end up being a better investment than the IPOs that were getting pushed out last year, when the Nasdaq mania was in full swing. "Part of me says maybe you want to buy this because nobody wants to touch it," says the hedge fund manager. Not that he's actually following up on his contrarian impulses.

And another hedge fund manager, who had been hoping to get a piece of the Loudcloud IPO, says she canceled her order when she saw the trouble the company was having attracting investors. "There's too much risk," she says. "There's no need to open yourself to that these days."