A Gilded Edge - TheStreet

A Gilded Edge

PurphasePro.com adds big-name bankers for its secondary offering, likely boosting its chances for success.
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Catching Up With the Joneses

One of the reasons I first became intrigued with

PurchasePro.com

(PPRO)

in

early November was that the business-to-business e-commerce concern had gone public -- and enjoyed a big rise thereafter -- without the backing of a glamorous Wall Street underwriter.

The success of the company's Sept. 14 IPO and its performance in the aftermarket seemed to counterbalance the prevailing wisdom that newly public companies -- particularly of the Internet variety -- need top-tier underwriters to succeed. Some of the "biggies" include

Goldman Sachs

,

Credit Suisse First Boston

,

Morgan Stanley Dean Witter

and

Merrill Lynch

. That PurchasePro bucked convention was a source of some pride for CEO Charles Johnson when he and I first met late last year.

So much for bucking convention. Today, shares of PurchasePro rose 3.9% (outperforming most of the stock's B2B peers) after the company revealed in an amended S-1 filing with the

Securities and Exchange Commission

that First Boston and

Robertson Stephens

have joined the underwriting syndicate for the company's long-awaited secondary.

As

previously reported, the offering, originally expected in late December, was delayed after the SEC raised issue with "forward-looking" comments made by PurchasePro in its press releases and also to this reporter, a.k.a. "me."

One PurchasePro board member, who requested anonymity, expressed frustration with the agency for being miserly with providing the company information for how it should proceed after it dealt with the initial concerns. "It's odd, but they can't hold you up forever," he said.

I played phone tag today with an SEC spokesman who I highly doubt would have commented anyway. Citing quiet-period considerations, PurchasePro's Johnson and Bill Brady, managing director of corporate finance at First Boston, separately declined to comment. Executives at Robbie Stephens could not be reached.

Playing With the Big Boys

The syndicate initially (and still) includes

Bear Stearns

,

Prudential Volpe Technology

, a unit of

Prudential Securities

, and

Jefferies

. (Pru and Jefferies underwrote the firm's IPO.) After being one of the underwriters listed on the initial S-1 filing on Dec. 8,

Needham

no longer appears in PurchasePro's filings.

First Boston, whose tech banking group is led by managing director

Frank "Bring the Rain" Quattrone

, immediately becomes the most high-profile member of the underwriting team. In 1999, the firm was the fourth-most-active underwriter of U.S. common stock offerings -- with an 8.6% market share -- and third most active in technology underwriting, according to

Thomson Financial Securities Data

.

For those keeping score at home, First Boston disputes Thomson's rankings and claims to be No. 1 in tech underwriting for 1999. A spokesman says there were some deals "not categorized correctly" by Thomson. In a press release yesterday, First Boston boasted it was lead manager on 194 financing and M&A transactions in the tech sector in 1999, with a total value of $115 billion, and that it lead-managed 54 technology IPOs with a combined value of $5.7 billion.

The revamping of its underwriting syndicate adds another layer of paperwork to PurchasePro's planned maximum 3.45 million-share secondary. However, those close to the deal expressed hope it will be completed by mid-February. No matter when, what better way to overcome the dilutive effect of a follow-on offering than to have First Boston and Robbie Stephens initiate favorable coverage of the stock, which both are likely to do shortly after the deal goes down. (That's not to say Wall Street research is colored by underwriting relationships. But that's not to say it isn't, either.)

Ultimately, the marketplace will decide whether having First Boston and Robbie Stephens "on board" validates PurchasePro's business plan, which is predicated primarily on enticing small and medium-sized businesses to use the company's "e-commerce solutions" to buy and sell a variety of products to each other online. Still, with the stock down nearly 44% from its all-time closing high, having some of the "

glamour boys" on its side is likely to give PurchasePro a boost.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

taskmaster@thestreet.com.