NEW YORK (AP) – Less than a day after Google Inc. slashed the expected asking price for its initial public offering on Tuesday, two other Internet companies followed suit and a third postponed its IPO indefinitely.

But the last-minute maneuvers by eCost.com Inc., WebSideStory Inc. and Lindows Inc. weren’t so much a reaction to Google as to an IPO market that began sputtering in June.

The slowdown came as the stock market was being buffeted by worries that rising interest rates and fuel prices might impede the economic recovery – concerns that also weigh heavily on the small, young companies that typically go public.

Thirteen of the 20 companies that have abandoned their IPO plans in 2004 have done so since the start of July, according to data compiled by IPOhome.com, a unit of Renaissance Capital Corp. Another 13 companies have put on hold their IPOs in the past month alone, compared with a total of 17 so far in 2004.

The bearish grip on the IPO market for new stock may not loosen unless economic and political signals star blinking more favorably. These include the price of oil, now within striking distance of $50 a barrel, the Iraqi war, and worries that a Democratic victory for the White House might lead to tax increases.

The recent stumbles are still shy of the number of stock offerings withdrawn in 2002 and 2003, so this may yet shape up as a strong year if jitters ease. In fact, 2004 has already surpassed the past two years by several yardsticks.

There have been 231 IPOs announced this year and Google was the 123rd company to actually go public. That’s roughly twice as many as the market saw on either count in both 2002 and 2003, according to IPOhome.

And in terms of the dollar amounts raised by IPOs, Google brings this year’s tally to about $25.5 billion. That’s still far short of the record $97 billion raised during the boom in 2000 and 2001’s $41 billion, but it already tops the $24 billion raised in 2002 and $15 billion in 2003.

The IPO recovery actually extends back into the second half of 2003, so a pause is not unreasonable to see. Though only 68 companies succeeded in going public last year, all but six of those IPOs came in the final six months.

What happens next is an open question.

“You look to reasons why the overall markets are down and I think those reasons translate to IPOs,” said Kathy Smith, research analyst for Renaissance Capital. “This is not a Google thing. We believe IPOs are very much about growth, and if the economy is not growing, people don’t want to own these stocks. They’re not established businesses.”

By contrast, experts stress a variety of factors in distinguishing Google’s stumble into the public markets from this summer’s slowdown in IPO activity.

These include the unorthodox, confusing auction method that Google employed to sell its shares, as well as the simple fact that few IPOs involve a business of Google’s size and maturity. And then there was the huge sum of money Google tried to raise, an attempt to value itself more generously than other established Internet leaders such as eBay Inc. and Yahoo Inc.

Compared with the tens of millions typically sought in an IPO, Google figured on selling as much as $3.6 billion worth of stock, an amount that was more than halved by the time the IPO was priced on Wednesday. The stock surged 18 percent on its first day of trading Thursday – but only after the asking price was slashed to $85 from an original range of $108 to $135 a share, and the number of shares being sold was cut to 19.6 million from 25.7 million.

“No IPO is completely unrelated from the rest of the market. … However, if any IPO would contain its own idiosyncratic component, as they all do, Google is certainly a company by itself very different from other companies,” said Matthew Rhodes-Kropf, a professor of finance at Columbia Business School.

“The average company going public is not so profitable or massively cash-flow positive. Companies typically go public early in their life cycles in an attempt to go forward with some strategy. They say, “We could take over the world, but we need X dollars.’ Google’s IPO is not going to reflect on that kind of market.”

Still, it was hard not to notice when eCost.com, a deep discount online electronics retailer, and WebSideStory, which tracks and analyzes Web site activity, sharply lowered their IPO prices less than a day after Google cut its, and Lindows, a Linux software maker, put its offering on hold.

“I think those companies would have priced lower with or without Google,” said Paul Bard, another analyst at IPOhome.

AP-ES-08-20-04 1646EDT



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