More Net-only IPOs come online
The second public stock offering in two days on the Internet may renew interest in using the Net as an alternative route to raise investment capital.
New York-based Spring Street Brewery, which fueled interest in launching IPOs on the Net with its $1.6 million offering last year, today commenced a $3.3 million, self-managed offering on the Internet.
Perhaps lending a bigger impact on the Net's nascent capital market was a $5 million offering by Netter Digital Entertainment, a Hollywood company. Netter produces the TV series Babylon 5 and will use proceeds from the offering to complete its acquisition of Videssence, which produces studio lights.
The deal is being handled by Los Angeles brokerage house W.J. Gallagher. The brokerage firm said the Netter offering is the first to get a "no-action" letter from the Securities and Exchange Commission, which means the regulatory agency has given de facto approval for the move by not stepping in to halt the offering. The Netter offering also won approval from the California Department of Corporations, which regulates transactions in the state.
"This is the first time that a broker-dealer has done a multistate offering on the Internet," said Russell M. Frandsen, an attorney for Gallagher. In previous offerings, like Spring Street Brewery, the company has marketed its own stock.
"What we have done [in the Netter deal] is to establish a procedure for offerings on the Internet," Frandsen added.
The legal provisions online are similar to those applied to traditional offerings. Mark Perlmutter, president of Direct IPO, refers to Internet stock offerings as seeking "VC-like returns for a VC-like investment." He adds that "it's high risk, high return."
Direct IPO will perform marketing functions for companies looking to raise capital on the Net, but it doesn't plan to become a broker-dealer itself. It is currently evaluating companies that might become its first client.
Wit Capital, a firm headed by Andrew Klein, the entrepreneur-attorney who owns Spring Street Brewery, has more ambitious plans. The company has indicated that it wants to handle a full range of Net-based financial services, including running an online stock exchange.
Wit, like Direct IPO, is in an organizational stage but has raised capital to do its first offering as a broker-dealer, perhaps as soon as next year.