January 5, 1999 12:00 PM PST

Net IPOs on a roll

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The new year is ushering in a seemingly unending crop of Internet initial public offerings.

Internet IPOs shot to new heights last year despite volatile markets, recapturing the IPO momentum that was lost during the fall. The high flyers included online community Xoom.com, which rocketed 145 percent on its first day of trading, and both uBid and Ticketmaster Online-CitySearch, which tripled their share prices on their first outings. Auction site eBay had one of the year's most successful technology IPO when its shares shot up more than 163 percent on its first day of trading.

Now there are at least 15 new Web IPOs in the wings, with more coming on board each day.

"The wind is behind our back right now in regards to the Internet," said William Smith, president of Renaissance Capital's IPO + Aftermarket Fund. "If you have a name with a 'dot com' on it, people are flying it out the door and investors are buying it up."

The list includes names that are recognizable as brick-and-mortar brands such as Web book retailer Barnesandnobles.com, as well as Web firms such as Priceline.com and ZDNet.

Others expected to take the IPO plunge include iVillage, an online community aimed at women; MarketWatch.com, a financial news site backed by broadcaster CBS; and ISP Prodigy Communications.

Less well-known firms on the IPO path are Rowecom, an online business-to-business provider of magazines and journals, and FlashNet Communications, an ISP that provides access in 450 U.S. cities.

Regardless of the size or reach of these companies, their IPOs are expected to soar.

"The hurdle rate is not that high for these Internet companies," said Smith. "It's not like you have to sit around and wait for their earnings or revenues to hit a certain benchmark."

In many cases, it is not the traditional markers of success that investors are looking for but rather at the intangibles.

"Good ideas are the premium here," added Smith, noting that mania is what is driving these stocks in many cases.

While many analysts believe that Internet IPOs will continue to soar, they are wary of predicting specifics. Some add it will even depend on how the market is doing on the first day of trading.

Still others warn that Web IPOs are out of control and that investors' joy is soon likely to change to dismay.

"I am expecting more an more companies to file and then the market will be overloaded to such a degree that it will implode," said David Menlow, president of the IPO Financial Network. "There will be carcasses of IPO investors who were seeking to become millionaires overnight."

Menlow also sees an upside to this scenario, however.

"These stocks are going to crumble in value and as soon as they hit some semblance of bottom, the market will take some of these stocks right back up," he said.

Only this time, it will take the ones that are for real higher, leaving the pretenders behind, Menlow added.

 

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