Pending HomeGrocer IPO fails to impress some analysts

Initial public offerings by two broadband companies are expected to share the spotlight next week, while an offering by an online grocer could fail to deliver big returns.

Analysts say HomeGrocer's IPO could fail to ignite much enthusiasm due to the lackluster results of two previous offerings by online grocers. On the other hand, IPOs by GT Group Telecom and Net2000 Communications could get a warm reception.

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The three IPOs are among 12 that are scheduled for next week that could raise about $1.7 billion. Another IPO that is being closely watched by analysts is from email services company Crayfish.

HomeGrocer is expected to be weighed down by the weak performances of its competitors, which are trading below their IPO price, analysts said.

Peapod, an early online grocer, is down about 50 percent from its offer price, and Webvan is down 20 percent from its IPO price.

"Both companies haven't fared well. And that's going to hurt HomeGrocer, even though Jim Barksdale and Amazon are investors," said Richard Peterson, an IPO analyst with Thomson Financial Securities Data.

After the IPO, Amazon will hold a 22.2 percent stake and the Barksdale Group will own a 4.5 percent stake.

"They're no different than the next Joe," said Jeff Hirschkorn, senior analyst with IPO.com. "They may get a little pop at first but it's not worth the investment."

HomeGrocer is seeking to raise up to $264 million, based on the high end of its $10 to $12 pricing range and 22 million shares it will sell. The company plans to price its shares Thursday and begin trading Friday under the ticker "HOMG." Morgan Stanley is the lead banker.

During the year ended Jan. 1, HomeGrocer generated revenues of $21.6 million, up from $1 million a year ago. Its loss, however, jumped to $84 million, compared with a loss of $8 million a year earlier.

Broadband shares have been hot, and that could lead to some decent gains for GT Group and Net2000, Hirschkorn said.

GT Group, which currently has a pricing range of $10 to $12 a share, plans to offer 16 million nonvoting, class B shares. The Canadian broadband company hopes to raise up to $192 million and is expected to price Thursday.

GT is expected to begin trading Friday under the ticker "GTTL." Goldman Sachs is the lead underwriter.

Meanwhile, Net2000 is hoping to raise up to $150 million, based on the high end of its $13 to $15 pricing range and 10 million shares that will be sold. The company, which provides high-speed Net access to large businesses, is expected to price Monday and begin trading Tuesday under the ticker "NTKK." Goldman Sachs is the lead underwriter.

Nortel Networks will hold a 10.5 percent stake in the company after the IPO, adding to the attractiveness of the deal, Hirschkorn said.

Email services company Crayfish, meanwhile, posted a loss of $3.5 million on revenues of $11 million for the year ended Sept. 30.

Crayfish, which serves small- to medium-sized businesses in Japan, has already shown signs of generating investor demand, as it nearly doubled its pricing range to $22 to $24 from an earlier range of $13 to $15. The company hopes to raise up to $223.2 million, based on 9.3 million shares being offered.

"What's interesting here is there is a lot of hype around email services and this is also in an emerging country for email," Hirschkorn said. "Japan is about four years behind the United States."

Crayfish plans to price its shares Monday and begin trading Tuesday under the ticker "CRFH." Morgan Stanley is the lead underwriter.