IPO of Ticketmaster Online-CitySearch Among 5 Best Ever

Ticketmaster Online-CitySearch Inc., an online seller of tickets and provider of city guides, produced a blockbuster first-time stock deal Thursday as its shares nearly tripled in price.

Powered by the investor craze for new Internet stocks, shares of the Pasadena company’s initial public offering, or IPO, rose as high as $60 a share. They closed at $40.25 a share on Nasdaq, up from an initial price of $14.

Investor demand for Internet company stocks made Ticketmaster Online-CitySearch one of the top five IPOs ever in terms of first-day price increase, according to CommScan, the New York research firm.

Because of the strong demand, the IPO sale raised $98 million for the company, rather than the $63 million originally expected. Based on the 69.5 million shares outstanding and Thursday’s closing stock price, the company has a market capitalization of about $2.8 billion.

“This deal had everything going for it, including perfect timing and top management,” said Tom Taulli, a technology analyst with IPO Monitor, a Calabasas-based data firm.

The mood in CitySearch’s airy Pasadena headquarters was “like a party,” said one of a few dozen grinning employees--most of them in their 20s and 30s. Many workers, some in jeans and sweatshirts, were closely watching stock price moves and a few were teasing each other about the tens of thousands of dollars they had made in just a few hours.

Others said it was business as usual.

“We’re excited, but maintaining focus,” said Scott Johnson, an Internet business advisor for the firm, which has 560 employees.

In August, Barry Diller’s USA Networks Inc. merged the online ticketing arm of its Ticketmaster Group with CitySearch in an effort to expand its Internet business.

USA Networks, which owns the Home Shopping Network cable TV channel, plans to eventually cross-promote the local content of CitySearch with the television empire Diller is building.

Diller, who is credited with building the Fox network for News Corp.’s Rupert Murdoch in the early 1990s, was a key factor in the success of the IPO, analysts agreed.

“People forget Barry Diller made the Home Shopping Network,” said David Menlow, head of IPO Financial Network Corp. in New Jersey. “His propensity for innovation is something the market is waiting for and betting on.”

Diller and USA Networks control a majority stake of the company, and the IPO made their stake worth about $1.9 billion. Other major shareholders include company co-founder Bill Gross, Los Angeles Times parent Times Mirror Co., Intel, Compaq Computer and AT&T; Ventures.

Gross, 40, is the Caltech graduate who co-founded CitySearch in 1996, along with Charles Conn and backing from AT&T; Ventures, Goldman Sachs and Compaq.

Gross, who made his original fortune building and then selling the educational software firm Knowledge Adventure, now runs Idealab, the Pasadena incubator of Internet companies.

Gross and Conn saw their stakes in the company rise to about $173 million and $67 million, respectively, Thursday. The other big gainer was Joseph Gleberman, a Goldman Sachs managing director and member of CitySearch’s board, whose stake was worth about $106 million after Thursday trading.

In San Francisco to watch the IPO debut from the trading floor of lead underwriter NationsBanc Montgomery Securities, Conn tried to downplay the deal Thursday. He said he was still flying coach back to Los Angeles on Southwest Airlines.

“That stuff’s all on paper,” said Conn, 37, CitySearch’s chief executive. “This is just a milestone. There’s still a hell of a lot left to do to make sure we meet investors’ expectations. We’re still a money-losing company.”

Indeed, the company lost $64.1 million in the year’s first nine months, on revenue of $26.6 million.

Some analysts have questioned the firm’s ability to turn a profit, noting that its city guides are labor-intensive to produce and maintain and are not as widely visited or available as those of America Online, which has launched more than 50 digital city sites.

In fact, CitySearch has posted losses since it was formed. Before hooking up with Ticketmaster Online, the company had planned to merge with Zip2, a Mountain View-based producer of local online yellow pages and entertainment listings. That $300-million deal, announced in April, fell apart in May.

Proceeds from the IPO will go to repay a $42.5-million loan from USA Networks, as well as to capital expenditures such as sales and marketing.

Ticketmaster Online-CitySearch is just one of several high-flying Internet-related stock deals in recent months.

The first-day price gain of 188% by Ticketmaster-CitySearch was higher than that of EBay, the San Jose Internet auction company that rose 163% on its first day, closing at $47.38 after an offer price of $14 a share. However, EBay closed Thursday at $187 a share and remains the best-performing IPO this year.

The record holder for first-day gain is still Boston-based The-globe.com, which helps people set up World Wide Web pages. It rocketed 606% in its first day of trading Nov. 13, closing at $63.50 on Nasdaq from an initial price of $9 a share.

Some analysts are concerned about the investor frenzy for anything Net-related.

“I think we’re in some type of mania right now,” Taulli said. “Several months ago we had a dry period where nothing could get off the ground. Now, if it’s Internet and IPO, people don’t care what the company is, they just want it.”

In yet another example of that craze Thursday, some investors apparently confused the ticker symbols for Ticketmaster-CitySearch and building maintenance company Temco Service Industries and started buying the wrong company.

The case of mistaken identity caused a sudden spike in Temco shares to $65--from Wednesday’s closing price of $28.75--before they settled back and closed at $25.50. Temco’s ticker symbol is TMCO and Ticketmaster’s is TMCS.

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Hot Ticket

Ticketmaster Online-CitySearch Inc. was the fifth-biggest gainer ever in first-day trading among U.S. initial public offerings. The 10 biggest first-day trading gains, from issue price:

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Name First day of trading % Gain Theglobe.com 11/13/98 +606% Broadcast.com 7/17/98 +249 EarthWeb 11/11/98 +248 Secure Computing 11/17/95 +202 Ticketmaster Online-CitySearch Thursday +188 EBay 9/24/98 +163 Yahoo 4/12/96 +154 Rambus 5/14/97 +152 Boston Chicken 11/9/93 +143 Planning Sciences 4/30/96 +141

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Source: Securities Data Co.

HOW THEY FINISH

Even first-day gains of 50% or more are rare among initial public offerings. How IPOs have fared in first-day performance in the last three years:

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First-day change % of IPOs Loss 10.9% 0 to +10% 43.0 +11% to +25% 24.6 +26% to +50% 14.8 +51% to +100% 5.5 +101% to +200% 1.0 +201% or more 0.2

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Source: CommScan