While Go Daddy's titillating TV ads lampooning censorship may have raised some viewers' pulses when they debuted during the 2005 Superbowl, its planned IPO this week provoked little more than yawns from investors.
Becoming just the latest technology company disappointment for equity markets, the planned $200 million initial public offering of shares in Go Daddy Group Inc, a provider of online domain name registration, was withdrawn on Tuesday. Company officials blamed market conditions.
Ten tech IPOs, worth about $900 million, have been withdrawn in 2006, and Activant Solutions Holdings Inc, acquired by a private equity firm, was the only company not to cite market conditions, according to data tracker Dealogic.
With the broader market hampered by concerns about record oil prices and the direction of interest rates, tech stocks have been picked apart by wary, risk-averse investors.
"Even if they have a very good revenue outlook, business is good and margins are good, investors are just not interested in small technology companies," said Linda Killian, portfolio manager of the IPO Plus Fund, a mutual fund advised by Renaissance Capital that focuses on IPOs. Of 17 tech IPOs that actually made it to market this year, only seven ended their first day above their offer price.
In this year's most infamous IPO, shares in Internet phone provider Vonage Holdings Corp fell 13 percent on their first day and now trade at just over a third of the $17 offer price.
German memory chip maker Qimonda, in what was heralded as one of the year's biggest offerings, on Tuesday cut its offer size by a third and priced below its forecast range. The technology sector has struggled to recover from the dot-com bust.
In 1999 alone, 258 tech companies registered for IPOs. Since 2001, a total of 140 companies have registered. The industry's growing pains are largely due to the speed of its growth, said Douglas Freedman, an analyst at American Technology Research.
"The Internet boom happened when the industry should have been slowing down longer-term growth expectations just due to its size," Freedman said. Overblown valuations, recent stock option scandals and poor earnings only exacerbated the problem, he added.
"You get investors that really start questioning why they need to get involved in these highly cyclical stocks," he said, though he added: "One nice thing about markets is that they adjust quickly when they understand what the issues are."
"I would think we are nearing the end of this adjustment." Others are not so sure. "The deals getting done are barely getting done and there are not a whole lot of things on the horizon in terms of quality to lift us up out of this market," said Ben Holmes, publisher of Morningnotes.com, an independent research firm based in Boulder, Colorado.
The current tech stock malaise is due to a lack of quality, rather than a hangover from the bubble years, Holmes said. "Life goes on," Holmes said. "You can't keep looking back at 1999 and 2000."
As for Go Daddy, Holmes said the Superbowl ads featuring a scantily clad young woman at a congressional hearing may have been the company's highlight. "It wasn't a very good deal," Holmes said. "All they had were some sexy ads."
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