Citing market conditions, TheGlobe.com and Vignette said today that they will drop their plans for initial public offerings, marking two more tech companies to retreat from the public trough this week.
TheGlobe.com, an online community, apparently found that lowering its pricing range earlier this week was not enough to push its stock offering forward. TheGlobe.com lowered its price by nearly 30 percent, to between 8 and 10 a share from between 11 and 13. Wall Street had expected the company to set its IPO price as early as last night and to begin trading today.
"The company has seen over a 100 percent increase in revenues in both the second and third quarters. We have a strong balance sheet and have experienced tremendous growth so far this year," Todd Krizelman and Stephan Paternot, TheGlobe.com's co-chief executives, said in a statement. "Despite this performance and strong investor interest, the current volatility of the market did not offer the best opportunity for the company at this time."
Added Paul Bard, an analyst with Renaissance Capital IPO Fund: "There hasn't been a small-cap company to come out since online auctioneer eBay, and I think TheGlobe realized it's too risky to go out right now, given that investors are being highly selective."
TheGlobe.com spokeswoman Esther Loewy declined to comment on whether the IPO had generated enough investor interest to be oversubscribed. Some portfolio managers earlier in the week said they didn't plan to invest in the offering, citing a business plan that lacked a strategy for turning a profit down the line and the stiff competition the company faces.
Loewy declined to elaborate on whether the company will seek funding from private investors. "Our strong balance sheet should take us through for awhile," she said.
TheGlobe.com was hoping to raise up to $31 million with its IPO, and to use the proceeds for advertising, brand name promotions, and other general corporate purposes.
During the first six months this year, TheGlobe.com generated $1.17 million in revenues, up from $208,000 a year ago. Its net losses widened to $5.8 million during the period, from $767,000 a year earlier. The company had $13.15 million in cash and short-term securities as of June 30, as well as $10.45 million in working capital.
Vignette, meanwhile, changed its mind despite filing its IPO plans September 29. Luckily for the company, it had not yet started the expensive road-show process to generate interest in its stock offering, in which it would have presented potential investors with information concerning the company.
"Since we filed, the market had gotten fairly risk adverse," said Greg Peters, Vignette president and chief executive. "We didn't want any negative experience to taint us, because things are going well."
Peters added that the company does not have any immediate need for cash and easily has enough on hand to carry it through next year. Vignette reported $16 million in cash and securities and $12.4 million in working capital. Based on its IPO registration fee, it had hoped to raise an additional $30 million for general corporate purposes through the IPO.
In the first six months of its fiscal year, Vignette generated revenues of $5.17 million, up from $733,000 reported a year ago. Its net loss widened to $9.7 million during the same period, compared with a loss of $2.5 million a year ago.
"This is a real punch in the nose," said Richard Peterson, an IPO analyst with Securities Data. Vignette's reversal marks the 24th IPO to be pulled this month.
Among the other IPOs that were reeled back was one from Healtheon, an online health care and benefits management company that just yesterday withdrew its offering. Loewy said Healtheon's decision did not play a role in the TheGlobe.com's cancellation.
On average, tech IPOs have seen their share price fall 4.5 percent during the past month, running counter to the recent upside tick in the Dow, Peterson said.
(CNET: The Computer Network, publisher of News.com, owns an equity stake in Vignette. Portions of the StoryServer technology were developed by CNET and sold to Vignette in 1996 in exchange for stock in the company.)