Internet IPOs In Strong Debuts

The stock market roared back to life Thursday, perfect timing for the seven companies that made their Wall Street debuts Thursday.

In particular, the Internet-related new issues benefited from a strong performance by the rest of the Web sector. "It looks like there's some bottom-fishing going on, and the updraft is bringing up the Internet IPOs," said Steven Tuen, research director at IPO Value Monitor.

The IPO market hasn't seen seven new issues - excluding closed-end mutual funds - in one day since July 30, according to CommScan's EquiDesk. To find a busier day, you'd have to go back to last April.

"It's a little bit trickier market, but the enthusiasm is still there," said Kathleen Smith, portfolio manager of Renaissance Capital's IPO Fund (IPOSX). "We've been saying for a long time that the demand [for IPOs] has been strong but the supply hasn't been there. Now we've got our supply."

In what came as little surprise to most investors, Internet stocks led the latest market rookies. Horsham, Pa.-based VerticalNet (VERT) nearly tripled from its offering price. The company priced its 3.5 million shares at $16, above a $12-$14 pricing range that had already been increased from the original $8 to $10. Shares opened at 41 and closed at 45 3/8. More than 8.3 million shares changed hands, nearly 2 1/2 times the number of total shares available for trading.

VerticalNet publishes 33 Web sites devoted to specific trade industries, such as meatandpoultryonline.com and laboratorynetwork.com. The company has reserved a place on a number of other Web addresses, including cabletv.com and benefitsandhealth.com, presumably to create future sites. Lehman Bros. is the lead underwriter for VerticalNet, which lost $8.3 million on $1.8 million in sales during the first nine months of 1998.

• Prodigy Communications (PRGY), one of the oldest online companies, finally made its Wall Street debut. Its stock, priced at $15, opened for trading at 20, and then rose another 8 1/8 points by the close of trading.

  The White Plains, N.Y.-based Internet service provider, founded in 1984 as a venture between IBM, Sears, and CBS, sold 8 million shares at the top end of the expected range. Carso Global Telecom, a giant Mexican holding company, recently bought a majority stake in Prodigy.

  Prodigy is slowly becoming a regular ISP, shutting down by the end of the year the proprietary online service that once had more subscribers than early rivals America Online and CompuServe. By the end of 1998, the company had finally begun growing its subscriber base after years of declines. Prodigy has about 670,000 subscribers.

  Prodigy, like several of Thursday's new issues, had been in the pipeline for quite some time.

• Gabelli Asset Management (GBL), a mutual fund company headed by renowned stock-picker Mario Gabelli, picked up a tiny 1.8 percent premium on its first day of trading. The firm priced its 6 million shares a$17.50, within the expected range. Shares opened at 17 3/4 and inched ahead slightly by the close of trading. Volume eclipsed 5.6 million shares.

  The asset management company originally filed for an IPO last April under the name Alpha G, but lead underwriter Goldman Sachs reportedly had problems with Gabelli's compensation arrangement.

  While Gabelli has compromised a bit to get the IPO done, he still stands to be paid quite well for his efforts. He will receive 10 percent of the company's pre-tax profit as well as a deferred $50 million lump-sum payment in January 2002. Merrill Lynch and Solomon Smith Barney took over for Goldman as the lead bankers.

• It appears timing was everything for Palo Alto, Calif.-based Healtheon (HLTH) as well. The provider of Internet-based information system software for the health-care industry also had to postpone an original IPO attempt last October, when the new-issue market was at its nadir.

  This time around, the company saw its stock rise by 292 percent above an $8 offering price that came in at the low end of an $8 to $9 range that had been raised from the original $6 to $7. The stock opened at 21 7/8 - the first price at which most investors could buy the stock - and rose to 31 3/8 with 5.9 million shares changing hands.

  Healtheon was founded by Jim Clark, who also helped co-founded Netscape Communications.

• Telecommunications software developer Catapult Communications (CATT) rose 30 percent above its $10 offering price, with about half of those gains coming after the stock opened for trading at 11 3/8. The Mountain View, Calif.-based company sold 3.35 million shares via lead underwriter Hambrecht & Quist.
• Insurance Management Solutions (INMG), a small offering from Raymond James, ended its first day of trading flat with its $11 offering price. The company sold 3.35 million shares.
• Korn/Ferry International (KFY) has the dubious distinction of being the session's only IPO to fall below the offering price. The leading executive search firm, first filed for an IPO in August, sold 11.75 million shares at $14, within the expected range.

  Earlier this week, the company cut the number of shares in the IPO from 12.5 million.

  Korn/Ferry also operates FutureStep, an online job recruitment venture developed jointly with The Wall Street Journal. Company rival Heidrick & Struggles had to pull a planned offering last year due to "market conditions."

Written By Darren Chervitz, CBS MarketWatch