Barnesandnoble.com stock gains fell well short of other recent Internet issues after the online bookseller’s initial public offering, providing yet more evidence that Wall Street’s infatuation with Net-related stocks may be cooling.
In the first day of trading Tuesday, shares of barnesandnoble.com (Nasdaq: BNBN) climbed 27 percent to close at $22.94, up $4.94. Raising $421.6 million (US$), the 25 million-share offering became the second-biggest Net IPO ever (behind CompuServe’s $480 million).
The barnesandnoble.com gains — lackluster when measured against Internet issues that have more than tripled their first day of trading — came as Net stocks continued their slide.
The tech-heavy Nasdaq Composite declined 72.77 points, or 2.97 percent, to 2,380.89. The No. 1 online retailer (and barnesandnoble.com’s biggest competitor), Amazon.com, saw its stock fall $5.94, to $111.56.
The American Stock Exchange’s 50-share Internet index fell 16.64 points, or 5.62 percent, to 279.47. Heavyweights like Excite, Inc. Yahoo! and eBay have suffered significant losses this week, and newer entries that enjoyed stellar first day gains have lost value as well.
Sign of Coming Reality Check?
The declines could signal a sobering reality check that could radically alter what had been a pattern for much of the past year: money-losing Net IPOs routinely soaring 300 to 400 percent their first day of trading. The shift in attitude reflects fears of higher interest rates, but even more broadly, fundamental questions about the wisdom of gambling on continual money-losers that face more intense competition by the day.
The online booksellers’ price war, launched last week when Amazon.com slashed bestseller prices 50 percent, graphically illustrates the reasons for investors’ worries. Barnesandnoble.com, Borders.com and smaller online booksellers immediately matched Amazon’s discount. That, in turn, fed fears that a price war could eat away at projected margins and revenues of even the biggest e-commerce companies.
Losses … and More Losses
Barnesandnoble.com — Barnes & Noble Inc. and German media conglomerate Bertelsmann AG each hold 41 percent — reported $20.2 million Q1 1999 losses, from $9.5 million a year ago, despite steadily rising sales (to $32.3 million on the quarter).
Amazon sales have skyrocketed, to $610 million for the 1998 fiscal year, a 313 percent increase, and the company is on a pace to easily eclipse $1 billion in annual sales. Amazon continues losing money, however. In Q1 1999, it reported a $61.7 million loss, and its stock, which catapulted to $221 a share last month, has lost more than $100 a share since.
New York-based barnesandnoble.com, which had raised the offering range earlier this week from $11 to $13 to $16 to $18, said it would use proceeds to try to catch Amazon by expanding features, staff, services, marketing and promotions.