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Where have all the tech IPOs gone?

The market for Internet and technology initial public offerings is cooling off faster than the fall temperatures.

The high-tech IPO market is cooling off faster than the fall temperatures.

When online health care information company Healtheon, community site, and Internet software company Vignette all backed away from the public trough this week, it further chilled the market for Internet and high-tech initial public offerings.

Financial analysts and portfolio managers have said 1998 is an off year for IPOs, with a few exceptions, including, GeoCities, and eBay. But when the stock markets took a tumble in August, investors began scrutinizing the potential IPOs of Internet companies--most are not yet profitable--more than ever before. For nearly a month between August and September, not a single new offering emerged.

The retreats by Healtheon,, and Vignette this week, in which all three companies cited "poor market conditions," clouds the outlook for future technology offerings.

Financial news and information site CBS, accounting software company Concur Technologies, network management and security firm NetSolve, and online reference library EarthWeb all have filed registration documents to go public, but still could elect to wait for sunnier prospects.

In addition, e-commerce software vendor InterWorld is close to withdrawing its planned IPO. Spokesman Susan Fairty said InterWorld's board tonight will discuss pulling its offering because of market conditions. A source familiar with InterWorld's deliberations indicated that executives fear they won't get a good valuation at this time and thus are likely to pull the offering.

The IPO market started to sour in June, and probably would have been depressed for about three or four months, according to David Menlow, president of the IPO Financial Network. "But then August 31 came around," casting doubt on IPO enthusiasm, Menlow said, referring to the day when the Dow Jones Industrial Average lost more than 500 points and the Nasdaq Composite Index saw its single-largest one-day decline.

"The two archrivals of the IPO market are uncertainty and volatility," Menlow said. "They always have been."

Indeed, since the fateful August day, young Internet IPOs, among the most volatile on the markets, have taken a back seat to those of more established companies.

"Internet stocks will still be in demand, but not to the point of losing some fiscal responsibility," Menlow said. "It's no longer about perception, it's about reality."

Computer Literacy, an online retailer of technical books and manuals for IT professionals, also postponed an IPO this week, and is likely to opt instead for a private investment.

"The environmental state of the market is bad, especially for emerging companies that have a higher risk factor, and that includes us," said chief executive Chris MacAskill. "The combination of a small-cap deal and a limited operating history makes investors very jumpy right now."

Analysts said that, although Net firms are shying away from going public, investors are still putting money into the broader market.

Oil and gas firm Conoco became the largest U.S. IPO this week when it offered 175 million shares at a price of 23 each, netting more than $4 billion.

"If you look at the Internet sector, you'd say the IPO market was dead," said Kathleen Smith, portfolio manager at Renaissance Capital's IPO Fund. "But those who look at the IPO market in general are very encouraged by the Conoco deal."

Menlow argued that the Conoco IPO is hardly indicative of the overall strength of the IPO market. "A deal like Conoco is one that just exudes quality," he said. "The company's been around since 1875."

Indeed, analysts agreed that current conditions indicate only the largest and most profitable companies are likely to be successful in their bids to go public. They noted also that investors appear to have found value in many so-called "fallen angels," companies that went public but didn't fare well during their initial offerings. About two-thirds of 1998 IPOs are trading at or below their offer price, Smith pointed out.

He didn't dismiss the idea of a recover, however. "There are investors willing to put up capital, but not in the Internet sector," Smith said. "Even though this week looks pretty dark, I think it's the dark before the dawn."

He added that only the largest of companies--typically not Internet start-ups--will attempt to go public in the coming weeks. But, she said, the IPO market could begin turning around as soon as mid-November or after the holidays, in mid- to late January.

Menlow added: "Until the market revalues itself?there will continue to be delays and cancellations [in the IPO market.]"'s Tim Clark contributed to this report.