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Internet IPO & Direct IPO

Many dot com companies went public via a Direct IPO or Internet IPO. In hindsight, it's easy to understand that the heralded "New Economy" of the Dot Com era was supporting a tremendous bubble. The consequences of that bubble were disastrous, not only for the companies involved, but for a vast collection of investors -- both experienced and new -- who had come to the conclusion that they could make vast fortunes just as quickly as the Dot Com companies themselves by short selling large amounts of stock. What factors tie major Dot Com Initial Public Offerings together? What signs were there and what lessons can we learn to make profitable investments in the future?

The typical Dot Com IPO had a bunch of problems. The valuation of a Dot Com company took into account the idea of a site and how popular it "should" be, rather than the core business plan that was going to monetize that idea. As a result, the values of many Initial Public Offerings were overpriced and unsustainable. Many Dot Com companies had inexperienced IPO Advisor services that could not effectively manage the transition from private to public. You'll notice that some of the best companies on the internet -- companies that would have fit right in with the Dot Com era -- did not come onto the scene until later. Think of Google and Amazon, for example; companies where the lessons were learned.

Here are some Dot Com IPOs to remember:

1) Webvan:
Like Pets.com, Webvan wasn't able to keep its customers happy thanks to the logistical costs of its service -- in this case, home-based grocery delivery. It hit a high of $30 per share in 1999 and had fallen to a painful six cents two years later.

2) LastMinute.com:
This company did everything wrong, including doubling the offer price moments before trading began. Holding a 28% gain from $6 by day's end, it had all collapsed in two weeks. After a history that never saw profit, it was acquired by Travelocity in 2005.

3) DrKoop.com:
Before WebMD, there was DrKoop.com. The site's fate was tied into America Online -- back before it became AOL -- from the moment of it's Initial Public Offering. Naturally, its agreements to head the AOL Network soon meant nothing.

An Internet IPO or Direct IPO is when a company goes public without an underwriter. Contact the IPO News and Information Group to learn more about an online IPO.

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