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Intershop stock surges in Germany

An e-commerce software firm which went public last month reaches a market capitalization that's almost as large as two of its U.S. rivals combined.

An e-commerce software firm which went public last month in Germany has already reached a market capitalization that's nearly as large as two U.S. rivals combined.

Intershop Communications AG, traded under the symbol ISH on the Frankfurt Stock Exchange's Neuer Markt, sold 1.8 million shares of its common stock at $54 per share on July 16. The company, with marketing operations in San Francisco and its engineering team in the former East Germany, saw its stock close yesterday at 201 Deutsche marks, roughly $114.30 per share.

That gives Intershop, now with 6.2 million shares outstanding, a market capitalization of around $708 million. The sum almost matches the aggregated market caps of two publicly traded American competitors, Open Market, which closed yesterday at 8.5625 for a market cap of $296 million, and Broadvision, which closed at 18.6874 for a market cap of $453 million.

The July offering on the Neuer Markt (established a year ago for high-growth European companies) raised about $50 million for Intershop, which sold 1 million shares. Selling stockholders, primarily Intershop's venture investors, sold another 800,000 shares. The offering was managed by an international group led by Bank J. Vontobel & Company AG, and comanaged by Commerzbank AG, Hambrecht & Quist, and Oppenheimer.

Stephan Schambach, Intershop's 28-year-old CEO, called the offering Germany's "the first concept IPO," because the company has yet to show a profit, with break-even targeted for 1999 or 2000.

Intershop is actively shopping for acquisitions, though Schambach declined to be specific. He and two cofounders based in Germany, chief financial officer Wilfried Beeck and Karsten Sneider, vice president of professional services, control just under a third of the company's shares.

"One reason we decided to use the European exchange is that rather than being one in a million, we were basically the first technology IPO that was widely covered in Europe," Schambach said. "We got the undivided attention from institutional investors in Europe."

Schambach and other company executives have not previously discussed the company's remarkable growth to date, since German rules apparently require IPOs to be quiet for six weeks after the offering. That period ended today.

Intershop reported 1997 revenues of $5.7 million, up from $600,000 in 1996, posting a 1997 loss of $7 million. It outdistanced that with $7.9 million in revenues in the first six months of 1998, losing $9.8 million. Analysts who follow the firm expect it to reach $20 million in revenues this year.

Schambach said the company may do a secondary offering on NASDAQ next year, giving U.S. investors easier access to its shares.

Intershop markets two sets of software, one for standalone stores and the other for commercial service providers like ISPs and telephone companies that host storefronts for merchants. It claims that 4,700 Web storefronts run on its software.