Net2Phone (Nasdaq: NTOP), an Internet telephony service provider, closed up 11 9/16, or 77 percent, to 26 9/16 in its initial public offering.
The company priced its 5.1 million shares at $15, above its raised range of $12-$14. The 5.4 million shares were originally priced at $10-$12.
For the nine months ended April 30, Net2Phone had a loss of $ 42.9 million , or 9 cents a share, on revenue of 22.2 million. This compares to a net loss of 2 cents a share, or $ 673,922, on revenue of $8.0 million for the same period in 1998, according to the company's SEC filings. Net2Phone estimates its deficit is about $8.7 million as of April 30, 1999, and expects more losses as it chases revenue through banner and audio advertising, and sponsorship opportunities.
Hambrecht & Quist is the lead underwriter for the company of 174 employees, co-managers are DB Alex Brown and Bear Stearns. IDT Corp. (Nasdaq: IDTC) formed the Hackensack, New Jersey-based company as a subsidiary in October 1997. Immediately following the offering, the telecommunications company will still own about 58 percent of its class A stock, which has twice the voting power of Net2Phone's common stock.
Up to 750,000 shares of common stock included in the offering are reserved for America Online, Inc., Net2Phone announced recently as it upped the number of shares to 5.1 from the original 4.8 million. Up to 300,000 shares are also to be sold to National Broadcasting Company, Inc., and up to 200,000 shares are for GE Capital Equity Investments, Inc.
Other risks cited in the regulatory filings include competition from the slew of companies with similar services. Similar products are offered by VocalTec Communications' Internet Phone, QuarterDeck's WebPhone and Microsoft's NetMeeting.
Alcatel, Cisco, Lucent, Northern Telecom and Dialogic (which has entered into an agreement to be acquired by Intel) are also carving themselves out slices of the pie. Cisco Systems (Nasdaq: CSCO) has also recently acquired companies that help Internet service providers carry voice over the Internet . Other competitors, such as ICG Communications, IPVoice.com, ITXC, RSL Communications and VIP Calling, route voice traffic over the Internet.
Long distance providers, such as AT&T (NYSE: T), MCI WorldCom (Nasdaq: WCOM) and Qwest Communications (Nasdaq: QWST), as well as other major companies such as Motorola Inc. (NYSE:MOT) and Intel (Nasdaq: INTC), are also edging in on the market for carrying voice over the Internet. All of them have greater financial, distribution and marketing resources than Net2Phone.
If the price of long distance calls decline to a point where Net2Phone no longer has a price advantage over traditional carriers, this could also mean game over for the company.