IPO frenzy shows signs of cooling off; Wired Ventures delays offering
Last week's stock market roller-coaster ride sent shock waves through marketing and media companies lashing their hopes to the Internet.
The falloff hit technology stocks particularly hard and may have forced ad agency Poppe Tyson, New York and Mountain View, Calif., to reconsider the timing of its filing for an initial public offering. The Net-oriented agency late last week was said to be debating whether to delay or cancel its filing.
WAITING OUT THE STORM
Wired Ventures did postpone its offering. President Jane Metcalfe said in a statement the company, publisher of Wired and the World Wide Web zine HotWired, was going to "wait until this storm has passed." Wired Ventures declined further comment.
Also last week, CompuServe reported flat subscribership for two straight months and projected a loss of 15¢ to 20¢ per share for the current quarter ending July 31. Simultaneously, H&R Block announced it would spin off the remaining 80.1% of CompuServe that it owns.
The headlong rush to make fast money on Internet media stocks is probably over, analysts say.
"The market now has significant obstacles for companies seeking to go public," said Abe Jones, managing director of AdMedia Partners, an investment banking and consulting company. "Only the people with a really strong proven record with expertise and proven cash flow are likely to get a hearing."
Poppe Chairman-CEO Fergus O'Daly declined to comment about his agency's pending IPO except to say, "The IPO stuff is public record. The only thing I can suggest is to go wherever those public records are and stay up with it from that standpoint."
Leap Partnership, Chicago, another agency with strong Internet interests, has made no changes in its plan to go public by yearend, said President Tom Sharbaugh. True North Communications has been preparing an IPO for its True North Technologies unit, originally planned for late summer. However, the stock market's recent volatility and some senior management changes could have slowed progress or desire.
CompuServe's announcement that its subscribership has remained flat at 3.4 million for the past two months didn't surprise analysts.
In a July 16 conference call with shareholders, President-CEO Bob Massey said: a survey of subscribers found that they were canceling because of slower-than-desired access and difficulty in navigating the service. He said CompuServe will detail initiatives to return to profitability late next month.
Internet search engines, among the most hyped technologies issues around, have seen their stock value steadily decline since they went public earlier this year.
While Infoseek Corp. raised about $42 million through its June 8 IPO, Chairman-CEO Robin Johnson said that if his company were going public now, he'd most likely rethink the timing.
For advertisers and agencies, the Internet stock drop could be a dose of needed reality.
"We have constantly urged our clients to pace themselves and not get ahead of themselves," said Rishad Tobaccowala, president of Giant Step, a unit of Leo Burnett Co., Chicago. "What you're seeing in the market right now is what happens when you get ahead of yourself."
Contributing: Kim Cleland, Mark Gleason, Jane Hodges and Bradley Johnson.
Copyright July 1996 Crain Communications Inc.