CurrentOfferings.com Story:

Tech companies flock to IPO market

By David Shabelman, The Deal, March 23, 2004

After a long period of dormancy, high-tech companies are once again lining up to test the public market. But while the recent surge in filings for initial public offerings points to renewed vigor in the technology industry, observers said the recovery is fragile.

"The IPO market is so dependent on the general market," said Sal Morreale, who tracks IPOs for Cantor Fitzgerald LP. "If the stock market keeps going down, it's going to get harder and harder to get an IPO through the pipeline."

The latest to register for an offering was Brightmail Inc., a provider of anti-spam software. The San Francisco-based company is seeking to raise at least $80 million, with Lehman Brothers Inc., J.P. Morgan and Pacific Crest Securities serving as underwriters.

Also filing Tuesday, Match 23, was Shopping.com Ltd., a comparison shopping Web site based in Netanya, Israel. Shopping.com is the product of the April 2003 merger of DealTime Ltd., a shopping search engine, and Epinions, a consumer reviews platform. Handling that IPO, which is expected to raise $75 million, are Credit Suisse First Boston, Deutsche Bank Securities Inc., Goldman, Sachs & Co. and Piper Jaffray & Co.

Two other tech providers, semiconductor equipment maker Accent Optical Technologies Inc. of Bend, Ore., and wireless software company Seven Networks Inc. (see story) of Redwood City, Calif., also filed registrations this week. A total of 16 technology providers have gone public or announced IPOs this year. In 2003 a total of 105 companies filed for offerings, with 68 going public.

Patrick Reardon, director of Citigroup Global Markets Inc., said that technology companies preparing IPOs today are healthier than their counterparts during the tech boom of the late 1990s. That gives them strategic flexibility.

"If the markets are bad, they can remain private, continue to execute on their business plans and revisit the public market opportunity at a later date," he said.

Indeed, despite renewed optimism in the broader technology sector, the market remains volatile. Of the eight tech companies that have gone public this year, five are trading below their offer price. The best performer has been Atheros Communications Inc., a maker of chipsets for wireless networking equipment, up 22% as of Tuesday.

The worst performers have been Chinese technology companies. Linktone Ltd., a Shanghai mobile phone service provider that went public March 4, recently was down 27% from its offer price. Beijing-based TOM Online Inc., which provides content and services through mobile phones, went public a week after Linktone, and its shares are down more than 20% from the offer price. Shares in Semiconductor Manufacturing Inernational Corp., a Shanghai chipmaker, are down 22%.

"China is growing significantly, and it is a huge market," said Tom Taulli, author of "Investing in IPOs" and co-founder of CurrentOfferings.com. "But there are political risks, and Chinese companies may not be used to the stringent rules that public companies in the U.S. must go through."

Despite some recent weakness in the market, however, IPO watchers said stronger offerings are on the way. Internet search leader Google Inc. of Mountain View, Calif., is expected to announce details of its highly anticipated offering as early as the second quarter.

But experts warn technology companies and investors against using Google's experience as a litmus test for the tech IPO market at large.

"It's certainly a strong technology company, and investors will look at it on the same lines of eBay [Inc.], Amazon[.com Inc.] and Yahoo! [Inc.]," said Paul Bard, senior analyst with Renaissance Capital Corp., which operates IPOHome.com. "But what investors need to remember is that Google is going public as a much more mature company than those other companies. There's less risk, but less of an opportunity to provide a 1,000% return, like Yahoo and eBay have since they went public."