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eBay is betting the Street is ready to back tech startups

Just weeks ago, investors couldn't get enough of high-tech IPOs. Highfliers such as GeoCities (GCTY)--even though they had no earnings--sold initial public offerings of their shares and watched as their new issues jumped 50% or more in a day.

But IPOs that would have headed for the stratosphere in June now are having a hard time getting off the launchpad. Consider eBay Inc., a hot Internet upstart scheduled to go public around Sept. 23. Chairman and co-founder Pierre Omidyar, who won't comment about the offering, is out hawking his company's stock to investors who generally want little to do with tech IPOs--at least until Wall Street's roller-coaster ride smoothes out.

''Investors are focused on damage control with their existing names rather than looking for new names to buy,'' says D. Rex Golding, co-head of global technology banking at Morgan Stanley Dean Witter. Who can blame them? Shares of the 126 technology companies that went public this year are down an average of 12.8%, according to researchers CommScan LLC, while the Standard & Poor's 500-stock index is up 6.2%.

One result: Since July, 103 planned initial public offerings--more than a quarter of them in high tech--have been postponed or scrubbed, CommScan says. ''If the market stays down or continues to decline that will ultimately create a very big financing problem for technology companies,'' says Roger McNamee, a partner at Integral Capital Partners.

Omidyar's eBay, though, is one company that most analysts believe can still make a splash. The San Jose (Calif.)-based online auction service is already profitable--it earned $348,000 on nearly $15 million in sales in the first six months of 1998. The company takes a cut from the transactions between individuals who go to its Web site to trade everything from stamps to dolls.

The eBay offering is widely seen as a test of whether investors want to dive back into the most promising high-tech IPOs. It will also indicate whether the lofty valuations given to one-time tech darlings such as Yahoo! Inc. (YHOO) and Inc. (AMZN) are a thing of the past.

''GROUNDHOG TEST.'' Should the eBay IPO fly, investors will turn their attention to another hot Internet play, Healtheon Corp. The company, which uses the Net to connect insurers with health-care providers and is backed by Netscape Communications Corp. (NSCP) founder James H. Clark, is to go public in October.

Healtheon is taking nothing for granted. Company executives are holding weekly phone conferences with bankers to gauge the mood on Wall Street. ''It's the groundhog test,'' says director C. Richard Kramlich. ''The underwriters put their heads up to see if it's going to be a sunny day or not.'' Healtheon and eBay can only hope the weather changes soon.

By Linda Himelstein in San Mateo, Calif.


CHART: A Smaller Appetite for IPOs

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Updated Sept. 17, 1998 by bwwebmaster
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