Ip Os! Hot Tips! Get The Real Lowdown!

You'd think the Net would be a great place to do just that. Not necessarily

On the face of it, no medium should cover the market for initial public offerings better than the Internet. The IPO market is fast, and so is the Net. Web sites can chronicle change almost as quickly as it happens. And because the Web lets people act on information as soon as they get it, investors can go right out and trade, grabbing some of that dot.com dough for No. 1. Sounds good. So why are so many IPO sites so bad?

Three of the Web's best-known IPO sites--IPO.com, IPOMaven.com, and Renaissance Capital Corp.'s IPOhome.com (known until a redesign this month as TheIPOSite.com)--are a reminder that new media could use a dose of old-media values such as objectivity and independent judgment. IPO.com and IPOMaven don't work because they seem more determined to cheerlead for the market than explain it. Of these three, IPOhome is best, because it comes closest to offering the blend of information, online community, and trading that can let people unlock the Internet's potential. As I tried to imagine using the other sites to guide my investing, I thought to myself, no wonder day traders lose so much money.

GLARING DEFECT. Old-media virtues would have been especially useful last month, when at least a dozen deals were delayed as the IPO market tanked. It was a time for hard thinking and quick execution. Instead, two of these three sites weren't up to the challenge. The most glaring defect of IPO.com and IPOMaven is that their news and commentary are updated only once a day, or even less--which means they fail to exploit their ability to always provide the freshest information. These sites also have little or no trading capability, so they fritter away their e-commerce advantage. And they don't let people easily share information through chat or bulletin boards, improving on what they read on the Web or elsewhere.

IPO.com (which provides IPO-related content to Business Week Online) falls the farthest from the mark. During a tumultuous August, the site provided weekly commentaries and not a whole lot more. From Aug. 11 to Aug. 30, it posted just a handful of news headlines--and nearly nothing useful about specific deals. Instead, IPO.com dished up commentaries such as this one, on Aug. 5: "The sky is not falling, IPO fans, it's simply deciding what kind of sky it wants to be when it grows up." The headline on that piece derided bears as Chicken Littles.

Now here's one for the dubious-distinction file: IPO.com found it harder to be plainspoken about August's market than stockbrokers did. On Aug. 4, I had lunch at Merrill Lynch & Co. One speaker was star Internet analyst (and noted bull) Henry Blodget, who joked ruefully that he was ducking rocks those days. He added that a lot of weaker Web companies would fail--not come back strongly after August's correction. His point: A chilly market doesn't mean the baby should be thrown out with the bathwater. But he also meant it's not always a good time to buy and that strong market fundamentals don't make every stock a bargain. If Merrill can admit it, IPO.com should, too.

IPOmaven looks better, with a wealth of links to things like ceo interviews and breakdowns of top deals, but much of its information is shockingly old. For example, in early September, ipomaven's list of 10 "ipos to Watch" featured companies that went public between March and June. The deals highlighted weren't all so compelling that they demanded close watching, either: They ran the gamut from stars like Juniper Networks Inc. to laggards like CareerBuilder Inc., which has lost half its value since the day of its May ipo. It didn't look like someone made smart choices about culling the best deals. It looked like no one was watching the store.

Unfortunately, these two sites lack depth as well as timeliness. Both offer reports on companies that are little more than warmed-over extracts from Securities & Exchange Commission filings. For example, I looked up IPOMaven's report on Media Metrix Inc., and it was copied almost word for word from the prospectus. About all it did was change "we" to "the company." IPO.com's report on bamboo.com Inc. didn't even do that: Its "analysis" is taken verbatim from the prospectus summary and the company's boilerplate explanation that bamboo.com, like the rest of the world, may someday have competition. They have to do more to be useful.

WORTH EVERY PENNY. Happily, IPOhome is a lot better. Its commentaries in July and August argued that the IPO market was due for a pause. That sort of objective intelligence keeps investors away from weak deals in overheated times. Its reports on individual stocks show the intelligence of the honest-to-goodness buy-side securities analysts at Renaissance. Very basic reports are free, and worth every penny. More detailed material costs $50. There are also intra-day headlines about events in the market. Most aren't followed by more news, but you can dig up details elsewhere.

IPOhome is also the only one of these three with a reasonably active bulletin board. Renaissance has an IPO mutual fund, but its site sends you to brokerage sites to actually buy fund shares (small funds usually outsource their sales for regulatory reasons). The verdict: IPOhome has almost everything, if not all neatly tied together.

All this carping leads to a fair question: If no specialty site is a perfect guide to IPO investing, what should people do? Gather intelligence from sites that do specific things well.

The tools are out there. For technology news, CNET Inc.'s News.com (a partner of BUSINESS WEEK's e.biz online) is a good place to start. Market-news sites such as Bloomberg.com and CBS MarketWatch have regular IPO news features. Online financial chat is justly maligned, but there are princes among the frogs. When I wrote for the community site Raging Bull.com, amid the dopes, some people were well-versed enough to challenge me on details from deep in a prospectus. You can learn from them. I did. Also, brokerage firms are putting more good research online. Much of this is available at Multex.com for free or for as little as $10. For raw information, you can't beat the SEC's own EDGAR database. Prospectuses are easier to read than they used to be, thanks to the SEC's plain-English push. O.K., I finally learned some accounting too.

When it's trading time, lots of sites will do. Just remember this wisdom from a bulletin board at IPOhome: "Always do your own research, [and] don't throw your money away by trusting in a stranger's opinion." Except mine, of course. Have I got a hot one for you....

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