The world-famous peacock, emblem of broadcasting giant
, made its first appearance in the stock market Tuesday as the company launched its Internet brands out of the corporate nest.
under the ticker symbol
, the stock's price quickly fell to earth, as any peacock would.
Shares of newly created
opened up 1 point at 90 and peaked at 93, then immediately plunged. By midafternoon, the shares were down 10, or 11%, to 79.
The new company is a mixture of Internet properties of varied stature in the online world. The stock's debut follows the closing of the deals that joined the companies.
NBC, which is owned by
, an entertainment site;
, a portal to local affiliate stations;
, an online repository of movie trailers, TV clips and the like; and a 10% interest in
, the online companion to the financial news cable station (and a competitor of
Those properties were merged with
, owner of
, which provides a wide range of Internet services. Snap was owned jointly by NBC and
, so CNET received approximately 13.8% of the shares of the new company.
The final company folded into the deal was
, an e-commerce company, whose shareholders will receive around 38.8% of the outstanding shares of the new company, one for each of their Xoom shares. Xoom's stock stopped trading at 88 1/2 Monday.
The remaining 47.3% of the shares will belong to NBC, which will also have the option to convert two additional notes it received in the deal. Converting the notes would give NBC a 52.6% majority stake in the new company.
The Web properties of MSNBC, the cable channel NBC operates in partnership with software giant
, are not a part of the deal.
NBC Internet also announced a marketing alliance with
Clear Channel Communications
. The radio company will promote NBC Internet's services on its more than 425 stations, the companies said. In exchange, Clear Channel's Web sites will receive use of some of NBC Internet's services and $20 million in cash over the next three years, executives said in a news conference.
NBC Internet will buy $405 million in NBC network and cable advertising.
Snap may have achieved better recognition as an online brand, but NBC's involvement gives the new company instant name recognition with consumers and investors, said Robert Silverman, NBC Internet's vice president. "If you walk in off the street with money to buy an ad, you're not going to get that," he said.
Paul Noglows, analyst for
Hambrecht & Quist
, immediately rated the new stock a buy, citing July numbers from
, the Internet research firm. The combined companies' Web sites would have ranked seventh online in attracting unique users, Noglows wrote.
The company also cited the same Media Metrix figures in slides distributed on Wall Street.
"We believe the rapid growth will be driven to a large extent by television promotion, which we expect to result in strong increases in traffic and e-commerce transactions," Noglows wrote, noting the new company's access to $405 million in NBC advertising. Hambrecht & Quist hasn't done underwriting for the new company, which was created as the result of a merger, not a public offering.
Noglows attributed the quick drop in NBC Internet's stock price to the rapid run-up in Xoom's share price in anticipation of the deal. Hambrecht & Quist, it should be noted, was one of fewer than 10 firms covering Xoom stock, which it had also rated a buy, thus contributing to the run-up.
Nicholas P. Heymann, who covers GE, NBC's parent, for
, said the deal puts NBC in a position to make a string of acquisitions and build its online business. With the new stock, the broadcasting company has a new currency, whereas before its only bargaining chip was unsold advertising.
"This is changing how GE looks at itself," Heymann said. "When you go into the knowledge side, you get, not extreme returns, but much higher returns."
Prudential rates GE a buy, and the firm hasn't done underwriting for any of the companies mentioned in this article. Heymann backed Noglows' explanation for the drop in NBC Internet's share price .
CNET shares fell 4 11/16, or 8%, to close at 50 15/16. GE shares fell 3 11/16, or 2%, to settle at 130 1/16. Clear Channel shares fell 13/16, or 1%, to finish at 80 1/2.