Some Dot-Coms Get Trampled in IPO Stampede
Apres July, le deluge.
Following a month of 64 IPOs, 24 of them just last week, August is off to a dismal start. Four Internet IPOs tanked today.
Online video store
Bigstar Entertainment
(BGST:Nasdaq) opened at 9 3/4, dropped almost 19%, and closed at 8 5/32. Network services provider
Splitrock Services
(SPLT:Nasdaq) fell 10%, closing the day at 9. The insurance resource
Quotesmith.com
(QUOT:Nasdaq) opened at 11 1/16 and ended under at 9 11/16. Even the much-anticipated
1-800-Flowers.com
(FLWS:Nasdaq) closed at 18 3/16, almost 13% below its 21 3/4 opening price, despite backing by powerhouse
Goldman Sachs
(GS) - Get Report
.
There is plenty of blame to go around, analysts say, but the main one is that there are too many companies rushing to go public before investors' money runs out. So far there is no sign that the IPO tap is about to turn dry.
The last time four IPOs closed on the same first day below their offering prices was Nov. 24, 1997, when
Electric Lightwave
(ELIX)
,
Holt's Cigar Holding
(HOLT)
,
Let's Talk Cellular and Wireless
(LTCW)
and
Motor Cargo Industries
(CRGO)
, relatively unknown brick-and-mortar companies from which no one expected a spectacular first-day pop.
Some blame Tuesday's action on the heat. "Summer is not the best time to have IPOs," says Alex Cheung, a portfolio manager at
Monument Funds
.
But a few other market watchers think it's a case of the copycat curse. "We've had a glut for awhile now," says Randall Roth, a senior analyst at
Renaissance Capital
. "There's a lot of companies that are me-toos." Except perhaps for 1-800-Flowers, all of today's offerings are entering already-crowded spaces on the Net.
But it's not just IPOs that are suffering. Looking back over the year, Internet bellwethers
AOL
(AOL)
,
Yahoo!
(YHOO)
,
Amazon.com
(AMZN) - Get Report
and
eBay
(EBAY) - Get Report
have been falling steadily since April.
Amazon.com reached a peak of 209 1/8 on April 23, and has fallen some 46% since then. Yahoo! also dropped after an April 5 high of 219 1/5 and is down 42.9% to trade at 125 3/8, close to where it started the year.
If April was bad, other signs of trouble continued. Two Net IPOs closed below their initial pricings on May 26.
ZipLink
(ZIPL)
, and
Juno Online
(JWEB)
fell 11% and 12%, respectively, below their opening prices. The same day,
Edgar Online
(EDGR)
, which went public the same day, spent much of its first day below its 9 1/2 pricing, and closed slightly higher by the close.
The next time two Net companies closed below their offering prices came on June 22, when
Netivation.com
(NTVN)
opened at 10 and closed at 9 17/32, and
Salon.com
(SALN)
opened at 10 1/2 and closed at 10.
In spring, many analysts bemoaned a market flooded with Net IPOs. In a Renaissance Capital report released in March, Roth predicted the bubble would burst. It took a while, but now he thinks the time is here. "With more people talking about it, it became apparent and self-fulfilling," he says. "Now it looks like it's ripe for a shake-out."
Still, there are no signs of companies pulling out of going public. With an expected 16 more in the hopper this week, and a projected 66 for the month, August will sure be a busy month.
And then there's another 100 expected for September.
As originally published, this story contained an error. Please see
Corrections and Clarifications.
