SAN FRANCISCO (July 6, 12:05 p.m. EDT) — The fickle stock-market winds have forced Web trader ChemConnect Inc. to pull the reins on its plans to take the company public.
The San Francisco-based firm, offering online exchanges for plastics and chemicals, made a preliminary filing April 4 with the Securities and Exchange Commission for an initial public offering.
But a downturn in the market — which started just before the ChemConnect filing — has spurred the company to withdraw its IPO application, said Linda Stegman, senior vice president of marketing. The company withdrew its request on June 30.
Stegman noted that 28 companies have withdrawn IPO filings already in July.
"Technology companies are affected (by the downturn), but also IPOs in particular," Stegman said in a July 5 telephone interview. "We can refile at any time. We´ll benefit from going through the process once, and it will give us a much better understanding of it."
The dot-com company had hoped to raise a maximum of $80 million from its IPO, the date of which had not been set, according to the filing.
Despite the absence of an IPO, the company continues to grow and add investors via other means. ChemConnect has raised $105 million since its first round of private funding in March 1999 and has spent its money prudently, she said. It plans to expand its exchange services into Japan this year.
"We´re on plan and very aggressively going after targets," she said.
ChemConnect has signed up 10,000 members representing 7,000 companies, Stegman said.
But as with many Web trading companies, ChemConnect has profitability issues. In 1999, it recorded $127,000 in sales on a loss of $14.7 million.
Pulling back from an IPO might benefit ChemConnect, said senior consultant Jay Dwivedi of Kline & Co. Inc., based in Little Falls, N.J. Earlier this year, Web-based companies without sound balance sheets garnered cash from IPOs, Dwivedi said.
But since late March, investors have become much more cautious, he said.
"ChemConnect will have to demonstrate to investors that they will be able to make a profit," Dwivedi said. "This gives them more time to develop a business model without a lot of questions being asked. It´s a bad time to go to market if you don´t have excellent numbers."
Some of ChemConnect´s rivals in the plastics area still have pending IPO applications. Houston-based CheMatch.com Inc. registered in March and still plans an IPO, said Chief Financial Officer Larry McAfee.
The company continues to update its filing while waiting for favorable market conditions, McAfee said.
And Chicago-based Commerx Inc., parent of Commerx PlasticsNet, also has filed for an IPO. Chief Executive Officer Timothy Stojka said during NPE 2000 in Chicago that the company was consulting with bankers on IPO timing.
SupplierMarket.com Inc., a seller of plastic parts over its reverse-auction Web site, also plans to withdraw its IPO request — but under different conditions than those facing ChemConnect.
Software developer Ariba Inc., a publicly held company, announced plans June 26 to buy SupplierMarket in a stock transaction valued at between $550 million and $581 million.