What, More Internet IPOs? Not Again!

The flood of offerings could put a quick end to the hoopla if supply surpasses demand again.
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From the looks of things, the Internet IPO market is back to its old, astonishing form.

This week looks like a record for offerings for the year -- the Street is expected to see 26 deals, narrowly beating the week ending July 30, when 25 companies went public. Next week, another 23 are set to price, and 50 are on the slate for October, according to

Thomson Financial Securities Data

.

And IPOs are again doing their best bottle-rocket impressions. On Wednesday,

Kana Communications

(KANA)

,

E.piphany

(EPNY)

and

Broadbase Software

(BBSW)

each soared on their opening day. Kana closed up 243%, while E.piphany shot up 182% and Broadbase gained 95%.

But don't let these numbers fool you. The market looks so good largely because of pent-up demand, which stemmed from a dearth of offerings in August and early September, say people who follow the IPO market. In addition, many offerings have been adjusted downward, both in terms of price and the number of shares, which has made first-day increases easier.

"There's a lot of games being played with price ranges and shares to try to get these out the door," says Tom Taulli, an analyst with

internet.com

(INTM)

.

And the flood of offerings coming into the market could put a quick end to the hoopla if supply surpasses demand again. Investors also are seeing more me-too offerings, which come from companies in the same line of business. Investors often fear that more entrants into a field simply increase competition, and so they push down shares in the group. This helped muffle the IPO party last month. This week,

eGain

(EGAN) - Get Report

is expected to follow E.piphany and Broadbase, all of which provide customer-service solutions for e-businesses.

But for now, there's enough demand, along with enough engineering of deal structures, to make the market look good.

On Sept. 16, for example,

Luminant Worldwide

(LUMT)

, an Internet consulting firm, got attention because of its 51% increase on its first day. But it had slashed its shares offered to 5 million from 12.6 million, while increasing its range to 15 to 17 from 11 to 13.

Luminant isn't the only company that's had to make revisions. According to

CommScan

, a New York-based data-tracker, 14 companies that will have gone public by the end of the month will have revised their number of shares being offered or prices downward, with 10 of those raising less money than originally expected. Of those companies, two --

AirGate PCS

, slated to go this week, and

DSL.net

(DSLN)

, slated for the first week of October -- were postponements from last month. Other companies that have made price or share revisions downward include

Medscape

(MSCP)

, underwritten by

Donaldson Lufkin & Jenrette

(DLJ)

,

yesmail.com

(YESM)

, DSL.net and

Freeshop.com

(FSHP)

, all backed by

Deutsche Banc Alex. Brown

and

PCQuote.com

(PCQT)

, backed by

Prudential

.

"When you cut the price range it means you can't get the deal done

at the higher price, and the IPOs don't do well in the aftermarket," says Revell Horsey, director of equity markets at

Banc of America Securities

in San Francisco.

But for now, cutting price ranges seems to be working.

NETsilicon

(NSIL)

, a Waltham, Mass.-based company that develops semiconductor devices, cut its price range to 8 to 10 from 12 to 14, and priced at 7. Now it's trading at just under 15.

"This is actually healthy," says Horsey, who suggests that as the competition gets tougher, perhaps the Internet IPO market will approach normal levels. "Issuers are beginning to realize that some of the Internet sizzle has dissipated and they just need to become more realistic on valuation and expectations."