Conoco IPO Raises Record $4.76B

Shares of Conoco garnered an 8 percent premium to their offering price Thursday as DuPont's giant oil subsidiary raised $4.76 billion in the biggest-ever Wall Street debut for a U.S. company.

The Houston company (COC) sold 191.46 million shares to the public - 40 million more than originally estimated - with the stock's initial trade at 24 7/8 vs. its offering price of 23. Trading volume totaled 38.5 million shares as the stock rose as high as 25 3/16 before settling back.

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CONOCO (COC)

The offering surpasses the $3.03 billion raised by Lucent Technologies (LU) in 1995 as the biggest U.S. IPO ever. Proceeds will be used to repay debt owed to DuPont.

William Smith, portfolio manager of Renaissance Capital's IPO Fund (IPOSX), said Conoco was able to attract interest despite the tough market because of its track record and high profile. Conoco had been a public company before being scooped up by DuPont in 1981. "Not only are people interested in big, well-recognized names, but the key word is safety," Smith said.

Smith also noted the company's expected 3 to 4 percent dividend payout as an attractive feature of the deal. Conoco's market value of about $14.9 billion at the offer price is "favorable," Smith added.

DuPont will hold more than 70 percent of Conoco's stock, which it hopes to spin off to its own shareholders in a tax-free transaction within 12 months.

Most of Conoco's investors are expected to be oil-oriented institutions, many of which backed it in its previous life. But Smith said the deal may also attract retail investors familiar with the Conoco name from its 7,900 gas stations.

Theglobe.com saga continues
Meanwhile, Theglobe.com has put off pricing its 3.1 million-share initial public offering for another day, even as observers wondered whether the provider of Inernet home pages should pull its deal instead.

On Thursday, the company canceled a presentation it planned to make at a Volpe Brown Whelan investment conference in New York.

According to lead underwriter Bear Stearns, the deal is tentatively scheduled to price Thursday evening for trading on Friday. The deal had originally been slated to price on Monday.

Final terms of Theglobe.com's IPO haven't been set, but all indications suggest that it won't be among the best-received deals of the year. Earlier this week, the company and lead underwriter Bear Stearns cut the expected price to $8 to $10 a share, down from the original expected range of $11 to $13.

That's always a bad sign, said Rick Johnson, portfolio manager of Columbia Management's Small-Cap Fund (CMSCX), which dabbles in IPOs. A reduction in the price range "means [it's] a very weak deal. They didn't have the demand, so now they're backtracking," Johnson said.

Renaissance Capital said that, if its deal is done, Theglobe.com's valuation will be attractive. At a $9 offering price, Theglobe.com will have an implied market cap of about $88.1 million, not including outstanding options, a figure called "dirt cheap" by Kathleen Smith, also a portfolio manager at Renaissance's IPO Fund. "It was very inexpensive to begin with," she said.

GeoCities, a newly public competitor to Theglobe.com, has a market cap of about $660 million. That's about 77.7 times GeoCities' sales for the trailing 12 months, compared with a 51 multiple for Theglobe at its expected offering range. In the last four reported quarters, Theglobe.com generated sales of $1.7 million and a loss of $8.6 million.

Columbia Management equity analyst Brian Smoluch noted that Internet stocks like Theglobe.com "don't trade on valuation, they trade on psychology."

Unfortunately for the company, TheGlobe.com's Web site does not rank among the top 50 individual Web sites, whereas GeoCities is in the top 10, according to the September ratings from Media Metrix.

Throw in the fact that the IPO market is going through one if its worst stretches this decade - only eight deals have priced in the last two months - and it's unlikely Theglobe.com's stock will see much of a pop if and when it begins trading, according to analysts.

"If they put [the price] down so cheap that it's a giveaway ... you may see a small premium, but it's not going to be anything to run down the street in your underwear over," said John Fitzgibbon, editor of The IPO Reporter.

Better to wait?
In fact, some analysts question whether Theglobe.com wouldn't be better off pulling the deal if its debut is as shaky as it appears.

"If there's such negative sentiment, I think you're better off to wait a while, grow the business and come back later, if you can, with a stronger story rather than try to ram through an IPO ... and be at the mercy of the market," said Steve Tuen, rsearch director of The IPO Value Monitor.

Of course, pulling an IPO can brand a company with a stigma of failure -- just ask Wired Ventures, which tried and failed to come public at three different times and with three different valuations. But, Tuen said, investors tend to "have a short memory if you come back with a solid story and show growth in your numbers."

Agreed Johnson: "There's a little bit of a stigma, but the stigma's already there" when a company reduces the price range of a deal.

One company that decided to risk being branded an IPO failure was Healtheon, which postponed its offering on Tuesday in favor of a $40 million round of private financing.

"While the IPO was oversubscribed, we felt an IPO under these current adverse market conditions was undesirable," said Mike Long, chief executive of Healtheon, which makes software for the health-care industry.

Investors in the private placement include company founder and chairman Jim Clark (the co-founder of Netscape) and existing backers Kleiner Perkins Caufield & Byers and New Enterprise Associates, the company said in a statement. According to a Healtheon spokeswoman, Morgan Stanley Dean Witter, the company's lead underwriter, also put money into the new round.

Written by Darren Chervitz