"Over the past several months, we have seen dramatic shifts in the market and determined that it is in the best interest of the company, its employees and investors that we not proceed with the offering during this volatile time," Idealab chief executive Bill Gross said in a statement Wednesday.
Founded in March 1996 by entrepreneur Gross, Idealab helps create and nurture Internet businesses. Among the publicly traded companies Idealab has stakes in are eToys, GoTo.com, Ticketmaster Online-CitySearch and NetZero.
Similar to venture capital firms but with a more specific focus, Internet incubators strive to nurture fledgling companies and help provide practical business and technology advice.
Incubators make money when the companies they take under their wings go public or get acquired. They provide services not unlike Internet consulting firms, but incubators generally have a greater financial stake in the companies they seek to help.
Recent market jitters have been especially painful for Internet incubators, many of which are trading at or near their 52-week lows--another similarity to Internet consulting companies, which were stung this summer when investors turned sour on the niche.
Analysts blame the incubator downturn on a general lack of enthusiasm for the e-commerce companies they're trying to nurture.
Shares of Rare Medium Group, a New York-based incubator and consulting company specializing in e-commerce, traded Thursday at $4.22. That's a 14.41 percent improvement from Wednesday's closing price, but it's a 95.5 percent decline from the company's 52-week high of $94.75.
Likewise, Andover, Mass.-based Internet incubator CMGI traded Thursday at $17.50, 89 percent below its 52-week high of $163.50. Stonepath Group, the new name of Netvalue Holdings of West Palm Beach, Fla., traded Thursday at $1.13, a 97 percent drop from its 52-week high of $39.31.
Given the harsh market for incubators, it's no surprise that Idealab pulled plans to debut on Wall Street.
Last April, Pasadena, Calif.-based Idealab filed documents with the Securities and Exchange Commission seeking to raise approximately $300 million through an initial public offering.
The company had lofty ambitions: One month before the filing, it said it would invest $1 billion more in new businesses. At the time it had stakes in 35 online public and private companies it valued at $8 billion.
But the markets tumbled sharply last spring, hitting the shares of e-commerce and content companies particularly hard. Many stocks in incubators' portfolios have yet to recover and are trading at 80 percent to 90 percent less than their 52-week highs.
As investors have begun to demand profits over revenue growth, several other tech companies have recently pulled their IPOs, including Net consultant Zefer, set-top TV box maker ReplayTV, incentive-to-surf start-up AllAdvantage.com, electronics retailer 800.com and Linux services company Linuxcare.
Despite Idealab's withdrawal of the IPO, "We have a solid financial foundation," Gross said. "We understand the measurements and criteria that the public markets demand."