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THE DAY AHEAD: Flowering IPO market is starting to stink

You know the Internet IPO market has gotten way too far ahead of itself when not one but two flower brokers are the hottest new issues on Wall Street. Nothing against flowers, but are these really the kind of companies investors want to rely on as we they head into the new millenium?

It was one thing when the booksellers, clothing outlets and even the toy stores got into the mix. But the line has to be drawn somewhere.

Wall Street's ravenous appetite for anything and everything .com has lead to this inevitable mess. (Proposed ticker: FLWS)priced its offering at $21 a share Monday, well above the original price range of $16 to $18 a share. Inc. (Proposed ticker: EFTD) will roll out Thursday. It's priced at between $9 to $11 a share but at this rate it could be $13 or $15 by Wednesday night.

The pundits say these stocks are worth buying right now because they have a name and they sell stuff online.

"I think will do exceptionally well," said Steve Lacey, an editor at IPO Reporter. "It's one of the stronger names."

Irv DeGrew, research director at, said it will get a "reasonably warm market reception."

"By that I mean it will get 50-percent-plus in the first trading day," he said.

That's not saying much. Internet companies should be disappointed if their stock doesn't at least double in its debut, especially since the vast majority of these iffy retailing stocks usually fall back to around their offering price within a month. Or worse.

These flower companies and their brokerage firms are trying to sell Wall Street on the notion that it's more convenient and appealing to order flowers online.

How hard is it to pick up a phone?

The future is flowers?

As a business model, both and are fairly simple. They take phone and online orders for flowers and a limited selection of gifts. They pass on these orders to local florists, take their cut and do some advertising.

In the nine-month period ended March 28, did $203 million in sales of which online sales, they trumpet, soared up 85 percent to $30.2 million.

Call me na?ve, but where do these companies see that huge revenue burst down the road?

The demand for flowers is pretty static. Just because people can order flowers online doesn't mean they are going to have any more weddings, funerals, anniversaries or apologies that require flowers. Throw in Valentine's Day and you still have a fairly finite number of flower-buying opportunities.

Maybe these companies really do believe in the Y2K meltdown.

Both readily admit they'll absorb substantial losses down the road as they ramp up their Internet infrastructure. Wouldn't want to be unprepared for that flood of flower orders coming down the road.

Investors who buy these stocks are either hoping to get in and out in a hurry or else they plan on holding these shares until they start turning a profit. And even then, what kind of profit are we talking about? A couple million dollars?


Unfortunately, brokerage firms keep bringing these cheesy retailing stocks to market and people actually buy them. They're watering down the market and distracting investors from other Internet properties that actually have a future.

Let's hope there will come a time when we look back and laugh at the dark ages of Internet investing when it was big news for a pair of flower-delivery facilitators to go public.