To shed some light on this week’s IPO calendar, just do the dot-com math. The answers may tell investors whether or not three Internet IPOs – including the much anticipated Google offering – will get priced in the coming week.If everything adds up and the deals get done, IPO bankers and investors will fly out the doors to start their traditional two-week break at the end of summer.If the numbers don’t add up correctly, bankers will have to sweat it out, like students forced to go to summer school in August.

The IPO equation

Since the beginning of July, the market has been anything but friendly to investors. $45 barrels of oil have taken their toll on stock prices, pounding the Nasdaq Composite Index down 14.4 percent since June 30, the same day the Fed raised interest rates for the first time in four years.

On that day, the Nasdaq Composite closed at 2,047.79.

Fast-forward to Thursday, August 12, when the Nasdaq finished at 1,752.49, a new 2004 closing low. On the same day, oil hit a record high of $45.75 per barrel – the highest price in the 21-year history of oil futures trading on the New York Mercantile Exchange.

Strangely enough, the recent IPO traffic has been one of the most productive periods in more than three years. From June 30 to August 12, bankers have priced 66 IPOs, according to available records – compared to 84 IPOs for the full year of 2003.

But the sailing has been getting rougher recently. Consider the last few weeks:

·          Five of 13 planned IPOs got priced during the week of July 26.

·          Five of 17 planned IPOs got priced during the week of August 2.

·          Ten of 19 planned IPOs got priced during the week of August 9.

This brings us to the week of August 16.

Historically, the IPO calendar dries up about two weeks ahead of the Labor Day weekend, and this year is no exception. Bankers have two dot-com IPOs on the new-issues calendar, plus a Google – well, maybe.

This week’s offerings:

ECOST.com is a Torrance, California-based multi-category online discount retailer of new, closeout and refurbished brand-name merchandise. ECOST.com offers more than 100,000 products in seven merchandise categories, including computer hardware and software, home electronics, digital imaging, watches and jewelry, house wares, DVD movies, and video games. ECOST.com plans to price 3.15 million shares at $9 to $11 each to raise $31.5 million. ECOST.com is a wholly owned subsidiary of PC Mall. After the offering, PC Mall will own about 81.6 percent of the outstanding shares of eCOST.com.

William Blair is the lead manager, and acting as co-managers are ThinkEquity Partners and Merriman Curhan Ford. For the year ending December 31, 2003, eCOST.com reported net income of $6.2 million on net sales of $109.7 million. For the year ending December 31, 2002, the company reported a net loss of $471,000 on net sales of $89 million. As of June 30, 2004, eCOST.com had an accumulated deficit of about $10 million. The company was formed in 1999, and has about 60 employees. Bankers plan to price the deal on Wednesday, August 18, to trade Thursday, August 19.

WebSideStory is a San Diego, California-based provider of on-demand Web analytics services. The company collects data from Web browsers, processes that data, and delivers analytic reports of online behavior to its customers on demand. WebSideStory plans to price 5 million shares at $10 to $12 each to raise $55 million. Friedman Billings Ramsey and RBC Capital Markets are co-lead managers. Acting as co-managers are William Blair and Roth Capital markets.

For the year ending December 31, 2003, WebSideStory reported a net loss of $1.9 million on total revenues of $16.4 million. For the year ending December 31, 2002, WebSideStory reported a net loss of $2.5 million on total revenues of $13.6 million. As of March 31, 2004, the company had an accumulated deficit of $55.6 million. Formed in 1996, WebSideStory has about 120 employees. Bankers plan to price the deal on Wednesday, August 18, to trade Thursday, August 19.

Google is a Mountain View, California-based leading Internet search engine. (And Tom Cruise, of course, is just a good-looking man living and working in L.A.) Google plans to price 25,697,529 shares of Class A common stock at $108 to $135 each to raise $3.12 billion. The company will offer 14,142,135 shares of Class A common stock and selling shareholders will offer 11,555,394 shares of Class A common stock. The shares are being offered through a Dutch auction bidding system. The offering price is to be determined by the highest bid it will take to sell all of the shares.

Morgan Stanley and Credit Suisse First Boston are the co-lead managers. Acting as co-managers are Allen, Citigroup Global Markets, Goldman, Sachs, J.P. Morgan Securities, Lehman Brothers, UBS Securities, Thomas Weisel Partners, WR Hambrecht + Co., Deutsche Bank Securities, Lazard Freres, Ameritrade, M.R. Beal, William Blair, Blaylock & Partners, Cazenove, ETrade Securities, Epoch Securities, Fidelity Capital Markets, HARRISdirect, Needham, Piper Jaffray, Samuel A. Ramirez, Muriel Siebert, Utendahl Capital Group, Wachovia Capital Markets and Wells Fargo Securities.

For the year ending December 31, 2003, Google reported net income of $105.6 million on revenues of $1.47 billion. For the year ending December 31, 2002, Google reported net income of $99.7 million on revenues of $439.5 million. Formed in 1998, Google has about 2,292 employees. Many report the Google deal will be priced during the week of August 16. But at press time, bookrunner Morgan Stanley officially stated the timing was “to be announced.”

Get out your calculators

To get a feel for why dot-coms keep flocking to the IPO altar, look at how the Dow Jones Internet Services Index has performed when compared with the Nasdaq Composite (and remember, the Nasdaq is considered by many on Wall Street to be the barometer of the IPO market):

52-week percentage changes:

Dow Jones Internet Services Index: up 70.5 percent.

Nasdaq Composite Index: down 12.7 percent.

Now here’s some dot-com math: since June 30, 2004, when the Dow Jones Internet Services Index closed at its year high of 275.66, it has slipped under the waves of a bear market. The index closed at 206.88 on August 12 – down 25 percent from its close of just 10 weeks ago.

Maybe it is time for the bankers and their IPO clients to take some time off and hope the stock market will bounce back after the Labor Day weekend.

Let’s just hope they don’t forget the sunscreen.