When in early May I wrote a couple of columns on MP3, the hot standard for digitized music you can download over the Web, I was buried in reader mail from TheStreet.com subscribers, who turned out to have both great interest in and, ahem, strongly held feelings about this new market.
I'm going to revisit the MP3 mania later this week, and take a close look at the prospects of
, one of the most highly touted players in this nascent market.
But this week is already exploding with interest in and news about the digital-music business. The minor influence is
conference in New York City, which opened yesterday and has been a rich source of new-product announcements, rumors and whispered alliances -- or, if you prefer, the classic 3 H's: hope, hype and hysteria. More than 1,300 attendees have been mixing and conferring, in a swirl of improbable dress, loud music, hallway deal-making and show-floor heart-breaking. Oh, yes: and some VERY loud parties. The poor old Marriott Marquis may never be the same.
But in a week of dazzling IPOs on Wall Street -- at least in number, if not in quality -- the second and much larger MP3 influence has been the bump and hustle over one of the likely stars of the week's IPO agenda,
(MPPP:Nasdaq), whose offering is to be priced Tuesday.
That pricing alone is going to be an adventure: This offering has been bumped from an original $9-$11 estimate to a $16-$18 range on July 12 and again to $24-$26 today. Tonight and tomorrow morning? Who knows?
Assuming the 12.3 million shares sell out at a median price of $25 -- a very safe bet -- the company will wake up tomorrow with proceeds of about $290 million after paying its underwriters ... and a market cap of (insert your best guess here).
But almost whatever your wrote in that space, it's probably too low, because this is one of the hottest IPOs to come down the pike in a long, long time. Indeed, the real betting today is on the multiple of the offering price MP3.com will earn.
If MP3.com closes tomorrow at the maximum offering price, 26 -- hah! -- its 66.6 million shares will be worth a whopping $1.73 billion. But say it triples, and closes around 78. Make the market cap $5.19 billion. A quadruple -- a close of 104 tomorrow isn't impossible, and is in fact the favorite number among some analysts I've talked with today -- and MP3's founders will party all night Wednesday evening, to the tune of a market cap of almost $7 billion.
The company has also disclosed that it has presold 3.3 million shares to France's
, one of the forces behind the pricey-stuff conglomerate
LVMH Moet Hennessy Louis Vuitton
. LVMH has also promised to spend $150 million on advertising, promotion and marketing services from MP3.com over the next three years, according to MP3.com's most recent
filings. Just another bonus.
Ahh, Internet economics.
So what does MP3.com have to offer? Well, first, visibility and a great name. Don't tell me you can't promote your company during the pre-IPO "quiet period." MP3.com and its underwriters have done a superb job of managing the news and the market's expectations in the months leading up to tomorrow's first trading day.
I'm not suggesting anything illegal, or even questionable. You can argue that the MP3 world itself was so hot that anything named "MP3.com" would have gotten a lot of press during that time ... and you'd probably be right. But the avalanche of gushy press -- I know, I'm doing it, too, but remember that I'm pure of heart -- has been unbelievable.
MP3.com offers a huge range of downloadable music on the site, plus access to the most popular software tools needed to play and transfer MP3 files, from the classic WinAmp to MusicMatch to
RealJukebox. MP3.com's forte has been the promotion of new artists of whom you've probably never heard, who are eager to give away their music through MP3.com in return for the exposure they hope will lead to a recording contract, tours, glitz and fame.
It's done a great job.
But moving beyond that promotional, public-service model to
may be hard. After all, MP3.com has been at the heart of the "no restrictions" movement that has opposed efforts by the industry alliance, the
Secure Digital Music Initiative
, which earlier this month published its more-or-less-final first-round standards for encoding digital-music files to prevent their distribution without payment.
If you believe, as I do, that "free MP3" music is already way beyond the point where closing the barn door will make a serious dent in the amount of music sloshing around the Net, then you've gotta love what MP3.com has done ... and, probably, cheer whatever unreal market cap it scores tomorrow.
But if you think that a mechanism that assures that songwriters and artists can get paid to keep on writing and singing and playing, and that the SDMI approach, as flawed as it unquestionably is, is a start on that, then you've got to wonder about MP3.com, and how it will ever achieve any level of profitability commensurate with tomorrow's eventual market cap.
If you got, or can get, a hook into some MP3.com shares tomorrow morning, then you're going to make money. A lot of money. If not, it's probably too late. Either way, stand back in the morning, or you'll get flattened by the buyers rushing to set a possible first-day IPO record.
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are consulting clients of Seymour Group, or have been in recent years. While Seymour cannot provide investment advice or recommendations, he invites your feedback at
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