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Rowe.com IPO surges

Shares more than double in midday trading for the provider of subscription-management systems.

2 min read
Shares of Rowe.com more than doubled in value shortly after the stock began trading today on the Nasdaq, jumping to 37 at one point before settling back to around 27. Rowe stock was priced yesterday at the high end of its $14 to $16 per share range, up from its initial price range of $12 to $14.

Rowe provides a business-to-business Internet system to manage subscriptions for magazines, newspapers, journals, and other periodicals. With 3.1 million shares offered, the company raised $49.6 million before expenses. The company has 9.6 million shares outstanding after the offering. The net proceeds from the initial public offering will be used to finance the expansion of Rowe's business and to increase available working capital.

J.P. Morgan was the lead manager for the offering, with CIBC Oppenheimer and Volpe Brown Whelan & Company as co-managers.

According to Rowe's filing with Securities and Exchange Commission yesterday, the company began operations in 1994, but did not generate significant revenues until March 1996. For 1998, Rowe had revenues of $19.1 million dollars but posted a net loss of $7.6 million after expenses. In 1997, the company generated $12.9 million in revenue but posted a net loss of $3.1 million after expenses.

The company noted that it depends significantly on a few clients and suppliers for the majority of its revenue. If the balance were to shift, Rowe could face a drop in revenue.

"We currently derive substantially all of our revenues from the kStore," its SEC filing said, referring to its one-stop site for business subscriptions. "A decline in demand for the kStore or the inability of the kStore to penetrate new markets? would have a material adverse effect on our future results of operations and financial condition."

The company said it depends on its alliance withbarnesandnoble.com for access to a broad catalog of books "to which we would not otherwise have access on comparable terms."

Rowe also depends on Reed Elsevier, which owns Lexis-Nexis, for a magazines and journals. Reed supplied 24 percent and 23.3 percent of Rowe's titles in 1997 and 1998, respectively. There is no guarantee that Reed won't pull the plug since it too sells services over the Internet.

"If Reed Elsevier stops offering us knowledge resources on favorable terms, we may not be able to offer clients competitive prices on their orders," the company said.

The company also said that a small number of its clients account for a substantial amount of its revenues, with their five largest clients accounting for 32.3 percent and 29.4 percent of revenues in 1997 and 1998, respectively.