Wit Capital

, a pioneer in its role as a so-called e-manager in stock offerings, filed for its own initial public offering Thursday but turned to traditional Wall Street for help with the transaction.

Wit's filing was widely anticipated, especially after it


Merrill Lynch


Internet analyst Jonathan Cohen in February to become research director, a sign it was building a true investment bank. But Wit has been clear about its ultimate goal, which is more modest than some new Internet investment banks.

So Wit, which caters to retail investors, isn't lead underwriting its own deal, unlike

Goldman Sachs


Donaldson Lufkin & Jenrette


, which is underwriting the offering of a tracking stock for its



Bear Stearns


will lead the offering, with Wit, as e-manager, listed second on the prospectus.

Thomas Weisel Partners

also is an underwriter.

No pricing information was provided, and Wit declined to comment.

Wit sees itself collaborating with underwriters that can distribute to big institutional clients. Other new

converts to online underwriting have broader aspirations.

But Wit wants to build its supporting role. It would like to see its share of deals climb to 20% to 30%, from about 5% to 10% now, and it would like to work its way up to deal co-manager. That's where the IPO proceeds come in.

According to its prospectus, Wit wants to strengthen its core distribution business by increasing its brokerage client base and expanding the broker network through which it distributes shares. It wants to be involved in a broader universe of deals and secure greater share allocations on them.

Wit wants to offer more brokerage products and services, as well as introduce after-hours online trading. Among the products Wit is planning is the proprietary

Angel Funds

for high net worth investors. And it wants to create joint ventures to expand its business abroad.

To achieve these goals, it will need more working capital, an expanded investment banking staff and research department -- as well as a greater sales and marketing effort.

Despite its lofty goals, Wit's income statement reflects its fledgling status. In 1998, the company had revenues of $2 million, over eight times 1997's $245,541 in revenue. Of last year's $2 million, $1.5 million came from investment banking, almost $300,000 came from its brokerage business and about $180,000 came from interest. Wit recorded a net loss of $8.8 million in 1998, compared with a net loss of $3 million the year before.

Although Wit's 1996 arrival on the Internet underwriting scene made it one of the earliest to recognize the power of the platform, other prominent competitors have materialized. Some

companies with brighter names attached are pursuing the business, such as


, pushed by




W.R. Hambrecht

and veteran investment bankers Walter Cruttenden and Sandy Robertson. And many online brokers already distribute IPO shares through partnerships with traditional Wall Street investment banks and have even started participating in underwriting.

Wit is involved in at least eight deals, excluding its own, that are in registration now. Those deals are heavily Net-related and include






. Wit has participated in at least 51 equity offerings, at least 42 of which were IPOs, including








. Wit did not return three calls for comment on additional deals in which it may be participating.

In only five deals has Wit played a big enough role for it to be listed on the cover of the prospectus as an e-manager. In the eight deals listed in the prospectus that are currently in registration it will take on the role of e-manager.

Meanwhile, Wit's brokerage business is small. It had about 17,500 accounts at February's end, up from 10,800 at the end of the year. It executed an average 353 non-IPO trades a day in January and February 1999, compared with 106 trades per day in the last quarter of 1998.

Charles Schwab


, the No. 1 online broker, averaged 93,000 trades per day in the fourth quarter and

National Discount Brokers


, the No. 10 online broker, executed an average of 4,420 trades per day, according to

Piper Jaffray


Wit grew out of founder, and now chief strategist, Andrew Klein's Internet IPO for his microbrewery

Spring Street Brewing

. It has tried to add some players to its staff, a necessary step in increasing its underwriting clout, but doing so has cost them.

In April 1998, Wit had to ante up big to win Robert Lessin,

Salomon Smith Barney's

former vice chairman. According to the prospectus, Lessin, chairman and co-chief executive, earns $250,000 this year, plus he participates in the annual bonus plan for executives. He also was given a loan of $5.75 million to purchase 5.75 million Wit shares at $1 each. The shares vest over time.

On top of that, one year, two years and two and a half years after the IPO, Lessin with receive payments of $2 million, $2 million and $1 million, respectively. If Wit is sold, Lessin will receive up to $5 million less any of the "anniversary" payments.

Ronald Readmond, vice chairman, co-chief executive and president, joined Wit in May 1998 after serving on the board. He had been vice chairman of Schwab. At Wit, he earns a base salary of $250,000 this year, plus a bonus of at least $250,000. He was also granted options to buy 2.5 million shares over time.

Mark Loehr, director of investment banking, joined Wit earlier this month after a decade at Salomon Smith Barney and

Smith Barney

as head of global equity and head of equity capital markets. Loehr makes $200,000 in base salary and was given a $1.9 million loan to buy 1.25 million shares of stock at $1.50 a share.

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