StarMedia Networks Inc. (proposed ticker: STRM) priced its initial public offering at the top of its range Tuesday. Shares will begin trading Wednesday at $15.
The company, considered the leading Internet company in Latin America, is offering 7 million shares. The price range was $13 and $15. Goldman Sachs is the lead underwriter.
The New York-based company, which maintains offices, in Sao Paulo, Mexico City, Buenos Aires, Bogota, Santiago, Montevideo, Caracas and Miami, said it derives most of its revenue from advertising. E-commerce will be added to the mix to "a lesser extent." In the second half of 1999, StarMedia plans to offer Internet service Argentina, Brazil, Chile, Colombia and Mexico.
In the first quarter ending March 31, StarMedia reported a loss of $15.5 million on sales of $1.5 million. For 1998, StarMedia had a loss of $45.8 million on sales of $5.3 million. StarMedia has an accumulated deficit of about $72.4 million.
A portion (28 percent) of first quarter sales were "reciprocal advertising arrangements" where StarMedia swaps advertising with radio and television outlets in lieu of cash. The also company sees "significant losses for the foreseeable future."
StarMedia counts Banco Santander, Bradesco, Ford, Fox Television, IBM, Nokia, Outpost.com, SkyTel, Sony and USA Networks among its largest advertisers. Those advertisers accounted for about 25.63 percent of total sales for the quarter ending March 31. For 1998, those advertisers accounted for 34.7 percent of revenue.
According to Nazca Saatchi & Saatchi, the number of Internet users in Latin America is expected to increase from 7 million users at the end of 1997 to 34 million users by the end of 2000. In addition, 90 percent of Latin American Internet users are affluent, making them attractive targets for Internet users.
Heavyhitters such as NBC, eBay Inc. (Nasdaq: EBAY) and Hearst Communications own sakes in StarMedia. StarMedia said it will work with its strategic investors "to develop new content and to add new features to our network."
Aside from the losses, StarMedia investors will also face other risks inherent with emerging markets. In regulatory filings, StarMedia cited currency fluctuations, social unrest, telecommunications infrastructure and Internet access costs as potential trouble areas.>