Web chemical trader ChemConnect Inc. has become the latest online company with plans for an initial public offering. But with technology stocks starting to fall back to earth on Wall Street, the major question is when the company actually sells its stock publicly.
"When they'll actually do the IPO could be delayed," said equity analyst James Waggoner of New York-based Sands Bros. & Co. "Companies that are living and breathing and growing now have their stock price on a respirator. A market correction could delay an offering."
A suddenly nasty turn for tech stocks has not thwarted ChemConnect's plans. The San Francisco-based company filed a registration statement April 4 with the Securities and Exchange Commission for an IPO. The company hopes to raise $80 million in the offering.
ChemConnect would trade on NASDAQ under the symbol CMCT.
The firm offers both a public exchange site for chemical products, called the World Chemical Exchange, and private sites, called corporate trading rooms, where chemical companies and pre-selected buyers can negotiate on material purchases.
The company's roster of charter members — all of whom own shares of ChemConnect — reads like a who's who of plastics material suppliers, including GE Plastics, Dow Chemical Co., BASF Corp. and Eastman Chemical Co. A recently completed round of financing raised $72 million from its chemical-company investors.
According to the filing, trades with Dow accounted for 31 percent of ChemConnect's 1999 sales.
Yet, the 4-year-old company is far from profitable, primarily due to start-up costs for the trading site. In 1999, ChemConnect recorded $127,000 in sales on a loss of $14.7 million. To date, only 78 transactions have been completed, according to the filing.
The company expects its losses to grow significantly this year, according to the filing. ChemConnect absorbed start-up charges of $55.3 million during the first quarter of 2000.
The dot-com company was a bulletin-board site until July, when it launched the World Chemical Exchange. Its private trading rooms, accounting for more than half of company sales, were opened four months later.
ChemConnect officials declined comment on the filing until it is approved by the SEC.
Pittsburgh-based Bayer Corp. has an equity stake in ChemConnect and has offered industrial products for sale, said Bill Gaughan, Bayer director for information technology for polymers and chemicals. The fledgling Web trader can be successful once it picks up steam, Gaughan said.
"They're now capable of offering a whole suite of online auction services," Gaughan said.
Five resin companies, including Bayer, announced plans April 5 to create an electronic marketplace for injection molded thermoplastics. ChemConnect's model differs from the catalog approach the resin makers have in mind, Gaughan said.
A larger concern is the sliding slope for technology stocks. Ventro Corp., a Web-based life-sciences chemical trader, has dropped from more than $250 a share to less than $50 a share in the past month, said Waggoner, who covers Ventro. Ventro's Web site trades under the name Chemdex.
Typically, SEC approval for an IPO takes 60-90 days. ChemConnect has not announced the number of shares or sale price for the offering.
Another Houston-based online chemical trading company, CheMatch.com Inc., filed in March for an IPO. In an April 5 filing, CheMatch set its offering price at $10-$12 a share and said it initially will sell 5 million shares. A sale date has not been set.