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CitySearch files to go public

The online guide files with the Securities and Exchange Commission for an initial public offering of up to $50 million in common stock.

CitySearch, the city guide directory, today filed for a public offering of up to $50 million, becoming the latest Net company to jump on the IPO bandwagon.

The filing comes about a month after CitySearch and Zip2 called off a merger, citing "differences in their technologies, product strategies, and business models."

CitySearch joins companies such as GeoCities and PointCast, which recently have filed for IPOs. Another Net company, Inktomi, already has gone public.

The filing also comes amid another sharp run-up in Net stocks. (See related story)

The underwriters listed in the CitySearch offering are NationsBanc Montgomery Securities, BancAmerica Robertson Stephens, and Donaldson, Lufkin, & Jenrette. The company has applied to trade on the Nasdaq under the ticker "CTYS."

USA Networks, an existing stockholder of CitySearch that owns 11.8 percent of the company, has the right to purchase the number of shares from this offering that will enable it to own up to 14.9 percent of the company after the IPO, the filing said. Barry Diller is a director of CitySearch, as well as chairman and CEO of USA Networks.

Internet entrepreneur Bill Gross owns 14.1 percent of the company, or 3.5 million shares, according to the filing. However, this includes 590,823 shares held by Gross's idealab, to which Gross disclaims beneficial ownership.

CitySearch chief executive Charles Conn owns 6.4 percent, or 1.6 million shares, and chairman Robert Kavner (the former AT&T senior executive) owns 224,322 shares. Goldman Sachs owns an 11.9 percent stake, or about 3 million shares. Conn's and Kavner's stakes includes shares issuable upon the exercise of stock options.

CityGuide launched its first city guide in May 1996 and now has a total of 12 with its business partners, which include the Dallas Morning News, Baltimore Sun, Los Angeles Times, KGO Television in San Francisco, and others. CitySearch also creates and hosts Web sites for local and regional businesses and organizations for a monthly fee.

According to the filing, the company has posted a net loss of $8 million for the three months ended March 31, compared with a loss of $9 million for the like period a year ago. The latest quarterly revenues were $3.1 million, compared with $470,000 for the like period a year ago. The company listed cash and cash equivalents of $16.45 million.

"At March 31, 1998, the company had an accumulated deficit of $58.7 million," the filing said. "As a result [of expansion plans], the company expects to incur significant additional losses and continued negative cash flow from operations for the foreseeable future."

CitySearch cited a laundry list of competitors, including Digital City, wholly owned by America Online; and Tribune Company; Microsoft (Sidewalk), and Zip2. The company also said it competes against Internet directories such as Excite (City.Net), Lycos (Lycos City Guide), and Yahoo (Yahoo Local); media companies such as Cox Interactive Media and Knight Ridder; and telecommunications companies such as SBC Communications (At Hand) and US West (Dive-In).

"Many of these companies have greater financial and marketing resources than the company, and may have significant competitive advantages through other lines of business and existing business relationships," the filing said.

"The company intends to use the net proceeds of this offering for general corporate purposes, including working capital, capital expenditures relating to the CitySearch site (such as enhancements to the company's server and networking infrastructure) and expansion of its sales and marketing capabilities," it continued. The company also mentioned plans to expand to more cities, both in the United States and abroad.

The filing also stated: "On September 22, 1995, the company issued an aggregate of 6,622,857 shares of its common stock to William Gross, a cofounder and director of the company, for services provided to the company, and aggregate proceeds of $5,000. On December 9, 1995, the company repurchased 2,000,000 shares of common stock from Mr. Gross for an aggregate price of $1,510."