How the Fourth Estate Fumbled the barnesandnoble.com IPO

Wall Street doesn't give out A's for effort. Media coverage of Wall Street is another thing, however. "Highflying" Internet companies gone public are "hot," as if the fortunes of the enterprise soar along with the first-day share price. But often nothing could be further from the truth: Hot too often means not.

It's in that context that recent offerings have been misunderstood: most notably, that of barnesandnoble.com (BNBN Quote). Some went so far as to call the IPO a failure. Even the most sober coverage of the May 25 offering went like this: "Shares of the online book retailer were offered at $18 and rose about 37%, a gain that paled compared with hot IPOs earlier this year."

The media seem to notice just the sizzle of the first-day trading while ignoring the meat of the issue. So here's a primer: The point of an IPO is to raise money for a company and provide that company a new currency: stock. A smart company with a formidable war chest is going to remain a player, regardless of the vicissitudes of the stock market. And barnesandnoble.com is certainly that. ...