April 7, 2000 2:25 PM PDT

IPOs delayed amid market turmoil

Stock market turmoil and investor concerns over the valuations of tech companies caused underwriters this week to take the unusual step of postponing several initial public offerings.

Demand for high-risk technology companies waned as tech stocks plummeted, then recovered on Tuesday. Another factor contributing to the reduced appetite for IPOs is the fact that the number of companies planning to go public continues to expand.

"When the Nasdaq crumbled, it affected some IPOs," said Jeff Hirschkorn, senior analyst with IPO.com. "Six IPOs were scheduled to go out this week but now are delayed. That's high. Sometimes you'll see one or two delayed in a week, but not this many."

Twenty-three companies were scheduled to go public this week, meaning that more than one-fourth were affected by the worsening market conditions. In addition, two deals were canceled.

HealthStream, which provides health care professionals with online educational training, and Camtek, an optical inspection company for printed circuit board makers, were among the six companies to delay their offerings until next week. The nontech companies that delayed IPOs were Adolor, DrugAbuse Sciences, Rigel Pharmaceuticals and Exelixis.

"We have been through four or five market corrections in the past, but what is disturbing about this one is people called in to question the fundamentals of the market, rather than things outside its control like the Asian crisis or interest rates," said Randall Roth, an analyst with IPO Plus Aftermarket Fund.

He added that investors questioned the valuation of companies, focusing on the fact that many young Net companies have slim revenues and no profits.

Added to those concerns is that there are more than 450 IPOs and secondary offerings in the pipeline, with many of the deals within sectors that are falling from favor, said David Menlow, president of IPO Financial Network.

"The IPO market is looking at a Tune in to CNET News.com TV's IPO Forecast supply problem that could choke an elephant," Menlow said. "We also have an oversaturation in too many markets."

That could cause many IPOs to enter the public market only to trade below their offer prices in the weeks and months following their debuts.

"Before, we'd see a lot of deals price above their range, but in the past two weeks we're seeing more deals price within their range," Roth said.

Based on past experience, some analysts note that the situation may rapidly improve.

"After the 1987 market crash, we had a lot of deals pulled," said Richard Peterson, an IPO analyst with Thomson Financial Securities Data. "But we did about 140 deals in the first quarter and had 200 deals filed that are expected to come next quarter. Barring any significant declines in the market, we're back to (normal)."

Next week, 23 deals are expected to debut, raising more than $2.3 billion.

Two IPOs that could capture investors' interest include Hong Kong Internet service provider Sina.com and Bookham Technology, which makes components for fiber-optic networks.

Sina is expected to raise up to $72 million based on the high end of its $15 to $18 price range and the 4 million shares it plans to sell. The company, which is being underwritten by Morgan Stanley Dean Witter, will trade under the ticker "SINA."

"Foreign ISPs have done really well," said Hirschkorn, who noted that Via NetWorks priced at $21 in February and gained 137 percent on its first day of trading.

Sina generated revenues of $4.8 million during the six months ended Dec. 31, compared with $1 million a year earlier. Its loss widened to $26.8 million in the period, compared with a loss of $1.1 million a year ago.

Bookham Technology seeks to raise up to $304 million based on the high end of its $12.56 to $15.70 price range and nearly 19.4 million American depository receipts being sold. Goldman Sachs is the lead underwriter; the company will trade under the ticker "BKHM."

Bookham reported revenues last year of $5.7 million, with a loss of $26 million.


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