Loudcloud, the Web infrastructure company co-founded by Marc Andreessen, barely rose 3 percent in its initial public offering Friday amid unfavorable market conditions.
Shares in the company climbed 15 cents, or 2.6 percent, to $6.15 on a volume of 15 million shares. This gives the company a market value of about $450 million, less than half the $1.1 billion it planned for in its earlier filings.
Thursday, Loudcloud raised $150 million when it sold 25 million shares for $6 each to large investors such as mutual and pension funds. Lead underwriters Morgan Stanley and Goldman Sachs twice changed the size of the offering to make it more appealing to investors.
Initially the company planned to sell 10 million shares, or a 9.6 percent stake of the company, at a range of $10 to $12. The terms changed to 20 million shares, or a 30 percent stake, at a range of $8 to $10 in mid-February. Thursday, the company altered the terms again, offering 25 million shares at $6 each, or 34 percent of the company.
"It's desperation," said Dave Nadig, a portfolio manager with MetaMarkets.com, who said he will not buy the stock. "I think they're pretty much standing on street corners trying to find people to buy. They need the $150 million to build their business."
Sunnyvale, Calif.-based Loudcloud designs, builds and maintains Web sites for businesses, including such high-profile companies as Nike and Ford Motor.
Several analysts say that the company faces an uphill battle in that investors are less friendly toward Internet companies than they were in 1999 and early 2000.
"To bring a deal with this kind of media notoriety, with this business plan, with this huge a loss in accumulated deficit, was really asking a lot of investors," said David Menlow, president of the IPO Financial Network.
Since its inception in September 1999 through last October, the company racked up a deficit of $180 million, according to its SEC filing. The bulk of this loss--about $124 million--is related to noncash deferred stock compensation.
The company's decision to go ahead with its IPO in an unabashedly hostile market is a clear sign of its need for money, analysts said. Otherwise, a company would likely wait until calm returned to the stock market, they said.
On Wednesday, Yahoo shook Wall Street with the announcement
that Chief Executive Tim Koogle would step aside and that the company's revenue would fall below expectations.
Thursday, Intel slashed its earnings forecast and announced it would cut 5,000 jobs--about 6 percent of its work force--over the next nine months.
These warnings follow a string of others from blue chip technology companies including Gateway, Oracle, Applied Micro Circuits and 3Com.
Still, some analyst remain confident in Loudcloud given its backing by prestigious investment banks Morgan Stanley and Goldman Sachs.
"Goldman and Morgan are the best in the business," Menlow said. "They understand the significance of making it work and will do their best to keep it afloat, they're going to do whatever it takes."
Loudcloud trades on the Nasdaq under the ticker symbol "LDCL."