IPO Heyday Is History, Analysts Say

March 20, 1997

BR IPO Heyday Is History, Analysts Say By Tania Anderson Staff Writer The high-tech initial public offering frenzy that made headlines in 1996 is over. Analysts said the urgency of local, high-tech companies last year to enter the public market will not continue in 1997. "There were too many disappointments in 1996," said Ulric Weil, senior technology analyst for Friedman Billings Ramsey, an investment banking firm in Arl

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IPO Heyday Is History, Analysts Say

By Tania Anderson
Staff Writer

The high-tech initial public offering frenzy that made headlines in 1996 is over.

Analysts said the urgency of local, high-tech companies last year to enter the public market will not continue in 1997.

"There were too many disappointments in 1996," said Ulric Weil, senior technology analyst for Friedman Billings Ramsey, an investment banking firm in Arlington, Va. "Too much was expected from some of the larger IPOs."

Dampened expectations are causing companies to be more cautious this year, analysts said. As a result, there will be fewer IPOs in 1997, and companies will be raising less money in each offering, analysts said.

Internet service providers, telecommunications and software companies led the local march to the public market last year. Indeed, the Washington region experienced at least two IPOs per month in 1996, raising between $9 million and $84 million per offering, according to analysts.

This year, the limelight will shift to the content providers of the Internet - companies specializing in year 2000 solutions and outsourcing companies, according to Weil.

Nine local, high-tech companies have already filed statements to go public with the Securities and Exchange Commission. Another handful of companies are considering going public in the next few months, according to industry insiders.

Two local companies have had a bumpy ride since staging successful offerings in 1996 - CyberCash and PSINet, said Weil.

Since its offering in February 1996, CyberCash's stock has fluctuated between $64 3/4 and $12 1/4. The company hit its low Feb. 20 of this year. CyberCash raised $40.8 million in that offering.

PSINet raised $45.6 million in May 1995, but the company's stock value has bounced between $19 3/8 and $6 3/4 in the year ending in February 1997. The company hit its low in April 1996.

Other notable IPOs in 1996 included LCC International Inc. of Arlington, Va., which raised $84 million; Primus Telecommunications Group, McLean, Va., which raised $63 million; and Yurie Systems Inc. of Lanham, Md., which raised $48 million.

High-tech IPOs are heavily tied to the market's perception of the return on high-tech companies, said Steven Shea, senior vice president of Ferris Baker Watts Inc., a provider of investment banking services in Baltimore.

There may be some large IPOs coming from larger high-tech companies in the Washington area, he said, but fewer IPOs overall.

Analysts said it's hard to predict how many IPOs will take place in 1997, but they expect the bulk of them to occur in the fall because of traditional market swings. One analyst said the decrease in IPOs in 1997 mirrors a decline in venture capital deals, which also hit a high in 1996.

However, Marc Benson, general partner of the $75 million Mid-Atlantic Venture Fund, disagrees that there will be a decline in venture capital deals.

"We have seen better quality [venture capital] deals going through than we've ever seen before," said Benson. "We will definitely do more deals this year than last year."