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Bringing Net IPOs back to earth

After a series of stellar Internet IPOs that seemed to have no upward limit, many of those high-flyers have sputtered and are now falling decidedly back to earth.

Though a recent bounceback has somewhat eased investors' pain, the bloodletting in the Internet sector continues. After a series of stellar Internet IPOs that seemed to have no upward limit, many of those high-flyers have sputtered and are now falling decidedly back to earth.

Based upon statistics accumulated by Thomson Financial Securities Data, 26 of some 70 Internet IPOs priced this year are now trading below their offer price. Furthermore, more than half of the new Net offerings in April and May have already slid past their original price.

While statistics indicate that there are still a few Net IPOs that have maintained their initial gains, the sector's dirty little secret is that those gains are calculated from a strike price that is reserved only for a select few. If an investor were to base their calculations after an issue's first day of trading--when a typical trader can buy in the open market--most Internet offerings have coughed up their early gains, while only small group of issues have managed to tack on additional gains following an IPO.

Among the notable laggards are, which has seen its stock price cut in half from its $12 offering; Comps.Com, which priced at $15 per share but since has lost nearly 56 percent of its value; and, which priced at $13 but has since been slashed by 47 percent.

Other expected leaders haven't fared any better. For example, eToys, which in its first day jumped to trade in the mid-80s, now hovers under $40.

The change in market sentiment is stunning. While the average first-day gain for an Internet IPO priced in the first quarter of this year was approximately 158 percent, Net IPOs priced so far in the second quarter have registered first-day gains of about 85 percent.

Looking at the crop of deals priced so far this quarter, just a handful of the 49 IPOs completed have been able to boost their share price in the days following their debut. For example, was priced at $18 and closed above $25 the day after its offering. Now it's trading around $15 per share.

Similarly, FlyCast Communications was priced at $25 and jumped to $30 on its debut, but now trades at $17. As for such high-profile names as or eToys, there has been little reason to celebrate.'s IPO was priced at $19 and skyrocketed to $60 the day after its offering. Now those same shares change hands at less than $26 each. As for eToys, after pricing at $20, the IPO ran up to over $76--but just like a fickle child who quickly tires of holiday gifts, the shares slipped back under $40.

Overall, the Internet sector commands a significant share of the IPO market to date in 1999. Of 186 IPOs completed this year, excluding closed-end funds, 70--or more than one-third--have been Internet-related. Of $22.1 billion in domestic proceeds generated by IPOs year to date, over $5.5 billion has been for Internet companies. Hence, about one dollar in every four IPO dollars raised this year has gone to Internet firms.

Furthermore, despite the punches some investors have suffered through from investing in Internet stocks, Wall Street is still gearing up to issue more shares. Of the 35 IPOs filed so far in June, no less than 20 issues are Net-related, including such concepts as,, and The deals continue...but will investors follow?