Overview & Analysis: Page 5
No 'Net HereFor the past couple of years Internet companies have been the heartbeat of the IPO market. Albeit, most firms enjoyed stellar success in early trading during the dot-com hey-day and that rapidly changed during 2001. Most continue to feel that selected entities will continue to debut in the upcoming months. However, for most of 2001, Internet firms found little or no interest by investors in entities with speculative businesses and burgeoning losses. Only a couple of these deals managed to debut during the year. But, the one that raised concern for public attention happened to be Loudcloud (ticker: LDCL), the 'Net firm pioneered by Netscape Communications scion Marc Andreessen. Most banked on his reputation for starting the Internet fascination when shares of Netscape Communications, a resident occupant in the Moonshot Hall of Fame, eventually quintupled before being sold to the predecessor company of AOL Time Warner (ticker: AOL) for $4.2 billion in 1999. Underwriters looked to Andreessen to help rejuvenate the Internet sector. Unfortunately, for them, he failed in his mission and Loudcloud's lead bankers Morgan Stanley and Goldman Sachs were forced to decrease the upwardly guided valuation to meet market demand. Demand was tested at $6 per share and the stock has fallen since debuting. Loudcloud is amongst the year's worst performing new issues. "It’s ironic that the whole bubble started and ended with Marc Andreessen," said Romulus Pereira, president and CEO of Riverstone Networks (ticker: RSTN), a manufacturer of routers, in an interview with Barron's. "We decided that we couldn't afford to have one of those deals that rises and falls away. People write you off if your stock drops below the offering price. In this market, compelling deals need to offer investors a roof to stand under." Shares of Riverstone Networks debuted ahead of Loudcloud through Morgan Stanley. By Dec. 28, shares of Riverstone were up 43.6% over its $12 offering price. The company serves a solid array of customers in major metropolitan markets. It attracted attention by future investors when it lowered its projected pricing structure on the IPO by $2. That lowered number enticed investors that wouldn't have looked at the company with a higher valuation and set forth a path by which bankers would follow to see deals succeed in a weakened market for technology stocks. By the way, the entity, in its latest quarter, reported a profit and has currently $450 million in cash sitting in the bank. That's great! Equally impressive is the firm's modest debt level of $175 million.
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