In Quiet Week for IPOs, Xoom Files for One

It was the week the IPO market stood still.

Paralyzed by a volatile stock market, no California companies went public through initial public offerings last week. But in a strong signal that some are betting on a recovery, several firms filed with the Securities and Exchange Commission to sell stock to the public through IPOs later this year.

In what is likely to be a closely watched deal, San Francisco-based Xoom Inc. filed to raise an estimated $46 million through underwriter Bear, Stearns & Co.

One of the fastest-growing direct-marketing companies on the Internet, Xoom attracts members with a variety of free services, including home pages, e-mail, chat rooms and online greeting cards. Members who sign up with Xoom agree to receive e-mail product pitches.

In the first half of 1998, Xoom was the second-fastest-growing site on the Web, according to Media Metrix, a data service. Xoom had about 3 million members as of Aug. 26, adding about 20,000 new members a day for the last month, the company’s filing said. About 80% of the company’s audience is male, but new features such as online greeting cards are designed to attract more women.

The company expects $7 million to $10 million in sales this year, according to past interviews with Laurent Massa, who co-founded the company in 1996 along with Chris Kitze. Kitze has started and sold three software and Internet companies, most recently Point Communications, which was acquired by Lycos Inc. in 1996.

Xoom is in the SEC-imposed quiet period, which prohibits officials from touting or publicly speaking about their company until the IPO is completed.

“They’ve been growing very quickly in a short period of time--they are trying to do what GeoCities did and become a top site,” said Tom Taulli, a technology analyst with IPO Monitor, a Calabasas-based data tracker. “Kitze is a top-notch entrepreneur.”

Still, considering market slides last week that hurt technology stocks, it’s unclear how investors will react to Xoom’s IPO.

“They won’t go public for two months anyway,” Taulli noted, “and a lot could happen by then.”

The company will trade on Nasdaq under the symbol XOOM.

Another deal drawing attention was filed by American National Financial Inc., an Irvine-based firm that markets residential title insurance, which filed to raise $15 million by selling shares at $10 to $12 through Cruttenden, Roth & Co.

American National Financial is not a title insurance company; it doesn’t issue title insurance policies. Rather, it offers the policies on the behalf of Santa Barbara-based Fidelity National Financial Inc., the nation’s fourth-largest title company, in an exclusive arrangement.

American National, which will be spun off from Fidelity, is riding high on a comeback in the California real estate market, which has boosted the need for title insurance.

However, analysts raised concerns about the deal, noting that the dramatically cyclical nature of the real estate business is likely to affect American National’s success in the public markets, as one poor quarter can send stock prices plummeting.

Company officials cannot comment on the deal or respond, as they too are in the SEC-imposed quiet period.

American National is part of a diverse financial empire cobbled together by William P. Foley II. Foley, who built Fidelity from a storefront operation in Phoenix by putting together a number of title insurers, is chairman of Fidelity and owns a 6% stake in American National. Under Foley, Fidelity has expanded far beyond the title insurance business and owns sizable stakes in Carl’s Jr. parent CKE Restaurants in Anaheim and Green Burrito parent GB Foods Corp. in Irvine.

In April, Fidelity bought an 18% stake in Cruttenden and an option to buy an additional 6% stake for a total of $5.8 million. In addition, Fidelity made the firm a $3.5-million loan to expand operations.

David Menlow, president of IPO Financial Network Corp. in New Jersey, said there are few publicly traded title companies, which will also make American National a hard sell among some investors.

“People don’t know how to feel about a title company, even though it might be doing a commendable job in this market and financials show steadily increasing revenues.”

American National reported $29.7 million in revenue in 1995 and $51.7 million in revenue in 1996. The company has 57 offices, most of which are in California.

Menlow also pointed out that all five of Cruttenden’s lead-managed IPOs this year are trading under the offer price, with at least one deal, Tag-It Pacific Corp., trading more than 60% below its $4-a-share offer price.

Along with Xoom and American National, another IPO deal filed last week came from Newgen Results, a San Diego-based company that helps auto dealerships market their maintenance services. It will seek to raise as much as $46 million.

None of the deals are likely to come to market any time soon. Indeed, last month was the slowest August since 1991.

IPO-related market indexes have fallen sharply in recent weeks. The Russell 2,000 index of small-capitalization stocks is down 25% from mid-July, and the Bloomberg IPO index, which tracks the performance of stocks during their first publicly traded year, is down 31% in the same period.

This market week is short because of the Labor Day holiday and no deals are scheduled to be priced by the top 15 underwriters.

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Times wire services were used in compiling this report. Debora Vrana covers investment banking for The Times. She can be reached by e-mail at [email protected].

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Popular Providers

Community Web site provider https://www.xoom.com ranked second on a recent list of the 50 fastest-growing Web sites. Because they provide an outlet for creativity and instant access to a large audience, community Web site providers have traditionally been among the most popular places to visit online. Top 10 fastest-growing Web sites for the first half of 1998:

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increase in Rank Web site audience reach* 1 https://www.angelfire.com 5.9% 2 https://www.xoom.com 4.8 3 https://www.preferences.com 4.4 4 https://theglobe.com 4.2 5 https://hotmail.com 4.1 6 https://www.excite.com 4.1 7 https://www.tripod.com 3.6 8 https://geocities.com 3.3 9 https://www.i.com 2.8 10 https://www.bonzi.com 2.7

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*Percentage of home-based Web users who have logged on to the site

Source: Media Metrix

Researched by JENNIFER OLDHAM / Los Angeles Times

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Tracking the Deals

A look at initial public stock offerings planned by California companies and how some of the state’s recent IPOs have fared:

Upcoming Deals

Company: Catapult Commun.

Ticker symbol: CATT

City: Mountain View

Industry: Tech

Size,in millions: $33.5

Offering: IPO

Estimated share price: $9-11

Underwriter: Hambrecht & Quist

Est. week: 9/14

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Company: Hospitality Marketing

Ticker symbol: HMCC

City: Irvine

Industry: Marketing

Size,in millions: 30.0

Offering: IPO

Estimated share price: 9-11

Underwriter: William Blair

Est. week: 9/14

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Company: Legacy Brands

Ticker symbol: (N/A)

City: Roseville

Industry: Licensing

Size,in millions: 7.1

Offering: IPO

Estimated share price: 4.50-5

Underwriter: Paulson Invest.

Est. week: 9/14

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Company: Fitness Holdings

Ticker symbol: FITN

City: Pleasanton

Industry: Fitness

Size,in millions: N/A

Offering: IPO

Estimated share price: N/A

Underwriter: Goldman Sachs

Est. week: 9/14

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Company: Gary Player Golf

Ticker symbol: PLYR

City: Santa Maria

Industry: Golf

Size,in millions: 12.8

Offering: IPO

Estimated share price: 7-8

Underwriter: Whale Securities

Est. week: 9/28

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Company: Audiohighway.com

Ticker symbol: AHWYU

City: Cupertino

Industry: Tech

Size,in millions: 27.0

Offering: IPO

Estimated share price: 12-15

Underwriter: Paulson Invest.

Est. week: 10/5

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Company: Etek Dynamics

Ticker symbol: ETEK

City: San Jose

Industry: Tech

Size,in millions: N/A

Offering: IPO

Estimated share price: N/A

Underwriter: Goldman Sachs

Est. week: 10/12

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Company: Tut Systems

Ticker symbol: TUTS

City: Pleasant Hill

Industry: Tech

Size,in millions: 2.5

Offering: IPO

Estimated share price: 14-16

Underwriter: Lehman Bros.

Est. week: 10/19

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Company: Skechers USA

Ticker symbol: SKX

City: Manhattan Beach

Industry: Shoes

Size,in millions: 115.0

Offering: IPO

Estimated share price: N/A

Underwriter: BT Alex. Brown

Est. week: 10/26

Recent IPOs

Company: Inktomi

Ticker symbol: INKT

City: San Mateo

Industry: Tech

Size, in millions: $36.0

Date: 6/10

Share price on 9/4: $53.75

Pct. change: +198.6%

Underwriter: Goldman Sachs

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Company: GeoCities

Ticker symbol: GCTY

City: Santa Monica

Industry: Tech

Size, in millions: 74.2

Date: 8/11

Share price on 9/4: 20.88

Pct. change: +22.8

Underwriter: Goldman Sachs

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Company: Restoration Hardware

Ticker symbol: RSTO

City: Eureka

Industry: Retail

Size, in millions: 52.8

Date: 6/19

Share price on 9/4: 22.88

Pct. change: +20.4

Underwriter: Goldman Sachs

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Company: Global Crossing

Ticker symbol: GBLX

City: Los Angeles

Industry: Tech

Size, in millions: 400.0

Date: 8/14

Share price on 9/4: 20.50

Pct. change: +7.9

Underwriter: Salomon

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Company: NetGravity

Ticker symbol: NETG

City: San Mateo

Industry: Tech

Size, in millions: 27.0

Date: 6/12

Share price on 9/4: 8.44

Pct. change: -6.3

Underwriter: BancAmerica R.S.

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Company: IDG Books Worldwide

Ticker symbol: IDGB

City: Foster City

Industry: Publishing

Size, in millions: 50.0

Date: 7/28

Share price on 9/4: 12.44

Pct. change: -19.8

Underwriter: Morgan Stanley

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Company: Terayon Commun.

Ticker symbol: TERN

City: Santa Clara

Industry: Tech

Size, in millions: 42.0

Date: 8/18

Share price on 9/4: 7.50

Pct. change: -42.3

Underwriter: BT Alex. Brown

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Company: Tag-It Pacific

Ticker symbol: TAG

City: Los Angeles

Industry: Retail

Size, in millions: 6.7

Date: 1/23

Share price on 9/4: 1.31

Pct. change: -67.2

Underwriter: Cruttenden

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Company: Earthshell

Ticker symbol: ERTH

City: Santa Barbara

Industry: Manufact.

Size, in millions: 277.0

Date: 3/24

Share price on 9/4: 6.00

Pct. change: -71.4

Underwriter: Salomon

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N/A = not available

Sources: CommScan, IPO Monitor, Securities Data, IPO Financial Network