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One O.C. IPO a Go, but Another's a No-Go

Stocks: DSL provider Flashcom will try shaky market, while spinal implant maker Interpore backs off planned secondary offering.


A Huntington Beach provider of high-speed Internet access said it wants to go public at a time when an unsteady stock market has prompted another Orange County biotech company to abandon its planned stock offering.

Despite the volatile market, Flashcom Inc. said it hopes to raise as much as $125 million, according to a document it filed with the Securities and Exchange Commission. No price per share or date for the initial public offering has been set.

Meanwhile, Irvine spinal implant maker Interpore Cross International backed off a proposed secondary offering of 4 million shares. The company has sufficient capital for its current operations, and decided Monday that a public stock offering in the present market would be "unwarranted," said Richard Harrison, Interpore's chief financial officer.

"It's a horrible time" for stock offerings, said Gail Bronson, a senior analyst at IPO Monitor, which tracks new issues. "This is a very volatile, choppy, erratic market."

Summer also is usually the low point for stocks of technology companies, which could add another hurdle for Flashcom's planned offering, Bronson said.

Richard Rassmus, Flashcom's chief executive, agrees that the market is unpredictable. He said the company began the SEC review process, which takes 30 to 45 days, "so that if the IPO market improves we are in position to go ahead."

Flashcom, which provides high-speed digital subscriber lines (DSL) to small and medium-sized businesses and residential customers, said it had more than 30,000 subscribers in 82 regions around the country as of the end of March. The company picked up $84 million in venture capital investments in April.

The company, however, lost $32.7 million last year on sales of $8.2 million, according to the filing. It also faces a class-action lawsuit filed by disgruntled customers, a matter that was not mentioned in the SEC document.

Flashcom said it intends to use the proceeds from the offering to expand its sales and marketing efforts and its networking infrastructure.

Analysts were split on the company's potential to carry off a strong market debut.

Cynthia Brumfield, president of research firm Broadband Intelligence Inc. in Bethesda, Md., said recent regulatory victories on behalf of digital subscriber line providers has strengthened the industry. "The IPO market for these DSL providers is going to be a good one for quite a while," Brumfield said.

She estimates that there are about 800,000 small-business and home DSL subscribers in the U.S. The residential market alone will have about 1 million subscribers by the end of this year, and should reach 4.8 million by the end of 2003, she said.

Flashcom has made a respectable name for itself in the second tier of national DSL providers, behind companies such as Covad Communications Group Inc. of Santa Clara, Calif., NorthPoint Communications of San Francisco and Rhythms NetConnections Inc. of Englewood, Colo., Brumfield said.

But DSL industry observer Nick Braak, business editor for, said the company is rife with problems--from its troubled financial outlook to a bad record on customer service.

"They've missed their window somewhat," Braak said. "Even if they were not a troubled company, the whole IPO market has gone sour. They're losing a lot of money and . . . don't know when [they're] going to make any."

Rassmus said he could not discuss operations in detail because of the so-called quiet time imposed on officers when an offering is pending.

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