Yesterday's share sale by Be Free, an online marketing company, bumped up the amount of money raised through IPOs to $45.61 billion, topping the record for all 1996 by $50 million, according to CommScan, a research firm.
Internet companies have been encouraged to pile into the market to sell shares because of their need for cash to boost advertising and acquisitions as well as a rally in Web shares. This year the average Internet IPO is up 158 percent.
"Companies' share prices rising dramatically and people becoming instant billionaires" is spurring Internet IPOs, said Steven DeSanctis, director of small-stock research at Prudential Securities. "You want to get in on the action."
The desire to buy Web shares--even though few of the companies make money--has made funding available for almost any Internet company that has exhausted its seed capital. A whopping 41 percent of the 419 companies that have gone public this year are Web companies, compared with 5 percent last year.
The wave of sales shows no sign of abating, with Charter Communications slated to sell $3 billion and United Parcel Service (UPS) expected to sell $4.2 billion as early as next week. All told, another 121 companies are lined up to sell $18 billion of new shares before the end of the year.
The Internet sales have been a boon for some investment banks that have captured the bulk of the Web business. Goldman Sachs, for example, has accounted for almost one-fifth of the money raised by Internet IPOs. Morgan Stanley Dean Witter, the second-largest Internet underwriter, accounts for one-eighth of Web IPOs.
A total of 234 Internet companies sold shares for the first time, accounting for half the number of IPOs and about 41 percent of the money raised. Last year, 44 Internet-related companies raised $2.06 billion in IPOs.
"People get the message," said David Menlow, president of IPO Financial Network. "The Internet is not a home shopping theme that's going to blow itself up."
TD Waterhouse's $1.01 billion share sale was the largest Internet IPO this year, though it wasn't the largest share sale. Goldman Sachs raised $3.6 billion in May, and Pepsi Bottling sold $2.3 billion of shares in March.
Those IPOs will likely be surpassed when St. Louis-based Charter Communications, the fourth-largest cable TV operator, and Atlanta-based UPS, sell shares.
Which stocks perform best?
Breaking down the sales by industry, the companies that sell computer- or
electronics-related products raised about 30 percent of
the $45.61 billion worth of IPOs. Financial institutions accounted for 15
percent of the total, and telecommunications companies generated 14 percent.
Of the $18.49 billion in Internet IPOs this year, e-commerce companies raised about 26 percent of the money, companies that provide information online raised 20 percent, and those selling Internet software accounted for 17 percent.
The Internet companies also have been among the best-performing IPOs, with share prices for some gaining more than 1,000 percent.
For example, F5 Networks sold $30 million of shares in April at a price of $10; those shares now fetch 150.81. The Seattle-based company, which makes networking products that manage traffic at Web sites, is this year's best-performing IPO.
The other IPOs with some of the biggest gains include Brocade Communications Systems, Phone.com, Internet Capital Group, and Red Hat.
Brocade is a maker of high-speed computer switches. Phone.com makes software that lets wireless users browse the Internet. Internet Capital Group is a holding company with interests in business-to-business e-commerce.
Durham, North Carolina-based Red Hat, which distributes a free computer operating system that competes with Microsoft's Windows, has risen 531 percent from its initial stock sale in August.
Copyright 1999, Bloomberg L.P. All Rights Reserved.
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