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This is just too good not to share.
Greedy to the Bone
by Kelly Black
July 11, 2000 - di•vine (di-vin')
1. Heavenly; perfect.
Any idea where I'm going with this one? If not, let me be frank. There's an
IPO offering in the pipeline that's overstayed its welcome. So, I'm giving
my two cents and spreading the word on this slight of hand. You'd do better
to hit the track and bet the ponies than give a second thought to investing
in the so-called B2B incubator divine interVentures.
Decked out in his signature ponytail and diamond stud earring, the company's
skipper, Flip Filipowski, is the millionaire mogul who sold his PLATINUM
technology software firm to Computer Associates (NYSE:CA) last year for $3.6
billion. With a $300 million piece of the pie and a non-compete hanging
around his neck, Flip decided to head into the incubator business.
Divine has 52 companies hurriedly stuffed into its portfolio, in preparation
for its own whirlwind IPO. But there's nary a one that you or I have ever
heard of, and barely half have made a nickel to date. In a crowded field of
me-too incubators, divine has one of the least impressive stable of sibling
companies. In addition, the firm posted a paltry $5 million in revenue for
the first quarter of this year, on bleeding losses of $77 million. But
neither shortcoming has been able to slow the incubator from reaching for
the moon with its bloated and underwhelming IPO.
In theory, divine interVentures plans to cash in its chips by spinning off
incubatees into lucrative public offerings. However, investors are unlikely
to greet this group of no-names warmly, when their parent holding company
can hardly get its own house in order, let alone get its own IPO out of the
nest.
CS First Boston was tentatively scheduled to handle this IPO, but divine
canned the underwriter when Credit Suisse recommended holding off until
fall. Wasting no time in search of a second opinion, divine tapped Robertson
Stephens to serve as master of ceremonies. Despite the nastiest market
correction Net stocks had ever laid eyes on, the incubator wouldn't take no
for an answer.
The company had originally dog-eared a staggering $350 million public
offering, planning to float 50 million shares between $6 and $8 a pop.
Folks, that's a truckload of funny money by any measure for a newcomer that
has yet to bear any fruit. With little investor interest, divine trimmed its
shares to 20 million, and still with no takers, lowered the number of shares
yet again to 14 million. All the while, the company bumped its price range
higher to help offset the slash-and-burn.
First climbing to $13 to $15 apiece, the pricing finally settled at a more
modest $9 to $10. But there's more than 100 million reasons why divine was
so careful to balance the offering size, and so anxious to get into bed with
an underwriter who would force this IPO on apathetic investors. Investor
interest or not, divine has numerous commitments from blue-chip backers,
that if the incubator completes a minimum $120 million offering before the
end of July, it stands to receive well over $100 million in private
placements directly following its IPO.
So as you can see, it's a simple matter of economics at the expense of
retail investors. Now that the firm has postponed its IPO for the third
time, expect to see some ridiculous eleventh hour juggling by both divine
and Robertson Stephens to get this offering into the new issues market - and
fast. Flip is under a tremendous amount of pressure to produce a winner in
divine. With nearly a half billion dollars worth of private investors' money
already invested in the incubator, a shelved IPO could be one of the
costliest train-wrecks we've seen in a while. Because by midnight August
1st, this incubator turns back into a pumpkin.
Any questions or comments, love letters or hate mail? As always, feel free
to forward them to kblack@xxxxxxxxxxxxx
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