Onvia.com soars 193 percent in debut

Onvia.com Inc. (Nasdaq: ONVI) closed up 40 1/2, or 193 percent, to 61 1/2 Wednesday in its initial public offering.

Its shares moved as high as 65 1/2 in late trading.

Onvia.com provides an e-marketplace for small businesses to buy and sell services and products.

It priced 8 million shares at $21 each.

Shares of Onvia priced far above their original price range of $11-$13 a share. The company, formerly known as MegaDepot.com has had some legal troubles, but is expected to do reasonably well in its IPO.

The offering, underwritten by Credit Suisse First Boston, was expected to price in revised range of $19 to $21 a share.

"It has all the right trimmings for a hot stock," said David Menlow of IPOfinancial.com. But the e-business market may have overstayed its welcome on the IPO front, and the stock isn't likely to go gangbusters in the aftermarket, he added.

"It has huge muscle from ICG (Nasdaq: ICGE), which has 23 percent ownership," Menlow said. This, and General Electric's (NYSE: GE) 7 percent stake in the company are its main strengths. Menlow also praised the company's revenue spike.

For the year ended December 31, Onvia.com had a net loss of $43.3 million on revenue of $27.1 million, compared to a net loss of $672 000 on revenue of just $1 million in 1998.

The company has had a troubled history. In July, an outside party stole private account information, including credit card numbers, from the company's customers after breaking in to the internal database of its former web site in Canada, MegaDepot.com. The perpetrator gained access after the company inadvertently provided some customers with the URL link to its internal database, and left the password protection turned off. A newspaper got the scoop before the company was even aware of the security breach, and gave Onvia's previous incarnation, MegaDepot, some negative publicity.

Though Onvia has since completed a network security audit, upgraded ensuring network security, it has some new legal problems to deal with.

Last month, a claim was brought against the company and its founder, president and CEO, Glenn Ballman. John Meier, who filed the lawsuit, claims he and Mr. Ballman had intentions to form a company similar to Onvia.com's, and that Mr. Ballman's role in founding Onvia.com breaches a partnership with Mr. Meier and fiduciary duties owed to him.

Mr. Meier asserts that he is entitled to 50 percnent of Mr. Ballman's interest in Onvia.com, as well as 50 percnet of the assets and business of Onvia.com. Onvia.com estimates that following the IPO, Mr. Meier could be entitled to up to $477 million.

"If Mr. Meier were to prevail on his claim against us in its entirety, this would severely harm our business, operating results and financial condition," the company said in its filings with the SEC.

Onvia.com competes with Internet sites that target the small business market including BizBuyer.com, Digitalwork.com and Works.com; as well as sites targeting the consumer market that also sell to small business customers, including Beyond.com (Nasdaq: BYND), Buy.com (Nasdaq: BUYX) and Onsale.com, which merged with Egghead.com (Nasdaq: EGGS).