The initial public offering pipeline is filling up again after the annual Christmas hiatus, with half a dozen mid-Atlantic companies hoping to go public while the market is still eager for Internet stocks.
One of the six has simply hooked its existing operations onto the Internet, but the other five are true Netrepreneurial ventures: three data networking firms and a pair of software and services ventures that wouldn't be in business if not for the Net.
Savvis Communications, Net2000 Inc. and Via Net.Works Inc. all are Internet infrastructure companies that provide electronic pipelines for Internet traffic. This highly competitive, capital-intensive line of business generally has had success raising capital in the stock market, but it hasn't produced a lot of hot IPOs.
OTG Software and webMethods are more likely to catch the imagination of IPO investors because they are in the fashionable business of providing business services over the Net.
The sixth company, eChapman.com, has a name that rings the Internet bell, but it is simply a minority-owned family of financial services companies that wants to go online.
No dates have been set for any of the IPOs, some of which are still in the first stage of review by the Securities and Exchange Commission. Based on their most recent SEC filings, here's the field:
Baltimore investment banker Nathan A. Chapman Jr. has long talked about the potential for providing financial services and capital to what he calls the "domestic emerging markets"--African Americans, Asian Americans, Hispanic Americans and women.
Two years ago he went public with Chapman Holdings Inc., an investment firm, and Chapman Capital Management Holdings Inc., a money management firm. Both are the only African American controlled, publicly traded firms in their business.
Now Chapman plans to combine those two companies with his privately owned insurance business and take the whole thing online. The goal, according to the prospectus, is "to be a leading interactive online community offering both financial services and a variety of lifestyle, educational and cultural content."
So far only a modest Web site has been built and eChapman.com is very much a work in progress, the IPO documents make clear. Plans call for swapping shares in Chapman's two public companies for shares in the new venture, adding online trading and possibly acquiring a bank.
The prospectus spells out a long list of risks for potential investors: The existing Chapman ventures are unprofitable, the company has no Internet experience and the whole enterprise depends on Chapman himself.
Chapman, 42, worked for Alex. Brown & Sons Inc. before going out on his own in 1986. Last year he became chairman of the University of Maryland Board of Regents. Chapman Holdings is the sole underwriter for the IPO, and Chapman will own 58 percent of the stock after the offering.
* Online financial services
* Nathan A. Chapman Jr., chairman, CEO
* 1999 revenue (through September): $6 million
* 1999 loss (through September): $1.6 million
* Offering: 3.333 million shares at $15 a share
Savvis is a spinoff of Bridge Information Systems Inc., a big but little-known business news and information provider that competes with Dow Jones & Co., Reuters Holdings PLC and Bloomberg L.P. Though its name rarely shows up on news provided to consumers, Bridge's 235,000 data terminals serve 4,500 financial institutions, including 75 of the top 100 banks in the world and 45 of the 50 largest brokerage firms.
An estimated 135,000 of those terminals are already linked by the Savvis network. The remainder will be added, creating a major source of traffic and revenue. Savvis then hopes to provide Internet links and other data services to firms in or near the 6,000 buildings in 83 cities that are on its network. Savvis faces fierce competition in the data networking business from both wire and wireless firms.
The prospectus notes that Savvis is heavily dependent on Bridge, which also is unprofitable, and that after the offering Savvis will continue to be controlled by Bridge and the investors who control Bridge.
Dual IPOs in the United States and overseas for Savvis are projected to raise $280 million to $320 million. About $149 million of the proceeds will be kept by Savvis for working capital, network expansion and acquisitions; the remainder will go to Bridge.
* Data communications network
* Robert A. McCormick, chairman
* 1999 revenue (through September): $17.6 million
* 1999 loss (through September): $52.8 million
* Offering: 12.75 million shares at $22 to $25
Via Net.Works has rolled up an international network of Internet service providers by acquiring 19 Net services in 12 European and Latin American countries. The acquisitions were financed with $181 million invested by half a dozen venture capital and private equity firms that will remain the company's principal shareholders.
Plans are to sell about 6.6 million shares in the United States, 6.6 million overseas and 700,000 to present investors. About $20 million of the IPO cash will be used to pay for prior acquisitions; the rest will be used for future growth.
Via Net.Works hosts more than 18,000 Web sites and has about 110,000 customers. Although the company describes itself as a business Internet service provider, 54 percent of its European customers and two-thirds of its Latin American accounts are individuals, the IPO offering shows.
In addition to all the usual risks of putting money into a young, money-losing business, investors need to worry about a huge overhang of 41 million shares that can be sold in the future, the prospectus notes.
* International Internet service provider
* David M. D'Ottavio, chairman
* 1999 revenue (through September): $48 million
* 1999 loss (through September): $33 million
* Offering: 14 million shares at $15 to $17
Grammarians and advocates of everyday English will cringe at webMethods, one of those Internet companies that defies conventional spelling and describes itself in obtuse jargon as "a leader in B2Bi."
That's business-to-business integration, a new category of software that provides electronic links among companies, their customers and suppliers. Using webMethods' systems, companies can hook up their computer systems as intimately as they wish, conducting all their business electronically if they want.
Though online retailing--e-tailing, in the jargon--has drawn more attention, electronic commerce between businesses is expected to grow much more quickly because its efficiencies produce a faster payback on the investment.
Since last March, webMethods has had a partnership with SAP AG, a big German software company whose systems are used by many companies to manage internal operations. About 35 percent of revenues are generated by the partnership, which puts a limited version of webMethods' software in the hands of SAP customers, hoping to entice them into wanting more.
The IPO is meant to accelerate the already blistering growth of webMethods, which racked up just $12,000 in revenue in the fiscal year ended in March 1997 but rose to $166,000 in 1998, $4.5 million in 1999 and $6.9 million in its latest six-month reporting period. Losses so far add up to about $11 million.
* Electronic commerce systems for business
* 1999 revenue (through June): $6.9 million
* 1999 loss (through June): $4.9 million
* Offering: Shares and price not determined.
OTG is an early leader in an industry so new that even tech investors don't know much about it: storage area networks, which are are used for online data storage management and access.
Corporate data maintenance has come a long way since the days when records were packed in brown boxes and shipped off to the Midwestern salt mines to be kept in cold storage for eternity. Backing up data on tapes or some other computer medium is only slightly more modern. The state of the art is the kind of company-wide systems built by OTG, which automatically archive what needs to be kept, keep track of where it is and make it easy to get it back when it's needed. And it's all done over the Internet, of course.
OTG sells software and hardware to do the job, but one of the company's key strategies is outsourcing, in which the Maryland firm handles the whole job for a fee.
Because the number of shares to be sold and their asking price has yet to be set, the prospectus is short on details of how the IPO money will be used. Some will go to pay off debt, some to existing and former shareholders, and the rest to the company.
Since OTG was founded in 1992, it has built up a base of 6,000 customers and accumulated about $22 million in losses.
An as-yet-undisclosed number of shares will be sold by founder Richard A. Kay, 43, who owns 67.3 percent of OTG. The largest outside investor is ABS Capital Partners, an affiliate of Alex. Brown & Sons, which owns 20 percent.
* Richard A. Kay, president and CEO
* 1999 revenue (through September): $17.9 million
* 1999 loss (through September): $841,000
* Offering: Shares and price not determined
After reselling communications services for Bell Atlantic Corp. for five years, Net2000 went out on its own in 1998 and began competing directly with the phone company and the army of other communications carriers. Its target customers are businesses with at least 50 phone lines and $50,000 a year in phone, data and Internet bills.
The business plan calls for a three-phase, 24-month rollout, starting in the Washington-to-Boston corridor, expanding into 10 additional markets by the end of next year and upgrading the system and adding four more cities by late 2002. The $131 million IPO is intended to provide cash to pay off a $42 million debt to Nortel Networks Corp., fund new construction and cover corporate overhead and sales costs.
If the business sounds similar to Savvis, it's no coincidence. Net2000 President Clyde Heintzelman was president and chief executive of that company before joining Net2000 last November, and before that he was a top executive at Digex Inc.
Carlyle Group, Blue Water Capital, Mid Atlantic Venture Fund and Nortel are among the early investors. They and other insiders own about 42 percent of the stock. They have not filed to sell shares in the IPO but could do so later.
* High speed data communications serices
* Clayton A. Thomas Jr., chairman
* 1999 revenue (through September): $18.7 million
* 1999 loss (through September): $22 million
* Offering: 10 million shares at $16
Jerry Knight's e-mail address is firstname.lastname@example.org