August 11, 1998 4:15 PM PDT

GeoCities doubles on first day

Despite a market downturn, GeoCities' initial public offering ran up almost 120 percent on its first trading day.

The stock closed at 37.3125, up 20.3125 from its opening. That gave the company a market value of $1.1 billion.

Shares in the community builder began trading at $33 a share, up from the target price set late yesterday of $17 a share.

Early indications and the investment community's keen interest in the offering had pointed to a successful IPO. GeoCities' target price exceeded the high end of its pricing range of between $14 and $16 a share, and the company raised $80.75 million.

"The offering was under very heavy demand. The upward revision in [pricing range] will serve...as an affirmation of investor demand," said David Menlow, president of the IPO Financial Network.

GeoCities fell slightly short of the opening performance of Broadcast.com, which more than doubled in price on its first day of trading

Menlow noted that if an Internet-related stock doesn't price at the high end of its pricing range or above, the stock likely will have a short-lived premium over the IPO price once it starts trading.

Earlier yesterday, GeoCities had raised its pricing from its initial range of between $12 and $14 a share, according to a filing with the Securities and Exchange Commission. The company floated out 4.75 million shares.

The online community went public at a time when tech issues, which have been the darlings of the recently sluggish IPO market, face some uncertainty given the rocky performance the stock markets have seen lately.

Nonetheless, analysts said they expected the closely watched GeoCities IPO to do well. For one thing, the company is one of the leaders in one of the hottest areas of the Net today: home-page building and hosting.

Yesterday, GeoCities was ranked the eighth fastest-growing site for the first six months of the year by Media Metrix. According to the study, half of the top ten fastest-growing sites were ones that provide home-page building tools for members. (See related story)

While profit margins on individual pages can be slim, companies such as Tripod (owned by Lycos) and TheGlobe are using their sites to build entire online communities.

Community ultimately is another name for site loyalty, with the marketing theory behind such efforts being that once Net users become loyal to a site, they will go there for all their cyberneeds, including e-commerce.

Sites have used email, chat, personalization, instant messaging, and other bells and whistles to lure users and hopefully get them to stick with one URL. Now, home pages have become a hot trend in the portal space because Net users love to be able to create their own personalized spaces.

Just today, for example, Lycos announced it was acquiring email and home page provider WhoWhere in a $133 million stock deal. (See related story)

Last week, America Online quietly rolled out a beta version of its own home page site, dubbed Hometown AOL.

In addition, rival portal site Excite also is expected to launch its own home-page offering soon.

GeoCities is one of less than two dozen companies this year to bump up the low end of its initial pricing range by more than 14 percent, said Richard Peterson, an IPO analyst with Securities Data. It is following in the footsteps of such companies as DoubleClick and Broadcast.com in increasing its range.

"The raising of the price is done to meet [investor] demand," Peterson added, noting that this year alone there have been 23 IPOs that averaged a 50.4 percent gain during their first days of trading.

Digital River, a provider of electronic commerce outsourcing solutions to software publishers and online retailers, also went public today. Slated to go public in the coming weeks are eBay and interactive ad agency 24/7 Media.

While GeoCities exceeded its initial price range, the same has not yet occurred for Digital River. The company priced at the low end of its range, at 8.50 a share, up only slightly from its open of 8.375. Although the stock opened below its target price, it managed to recover by the time the markets closed. The stock closed at 9.8750, up 1.375 from the open. The company floated out 3 million shares, raising $25.5 million. Digital's market value at the close was $165.2 million.

 

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