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topDivine shares fizzle on 1st day of trading
Stock drops 2% in delayed debut
By Rob Kaiser
Tribune Staff Writer
July 13, 2000
Chicago Tribune
A hot day for technology stocks didn't help Andrew "Flip" Filipowski's Divine Interventures Inc., which, after
many delays, stumbled out of the starting gate as it finally went public Wednesday.
Divine offered its shares at $9 but saw the price drop as low as $7.50 and close at $8.78 on their first day of
trading.
Considering the wave of negative publicity that Divine has endured over the past few weeks, some in the
Chicago technology community said they viewed the completion of the offering as a victory of sorts for the
company.
"It was do-or-die for them," said J.B. Pritzker, managing director of William Blair New World Ventures in
Evanston. "They are lucky to have gotten their public offering done in a choppy market."
Still, investors showed little appetite for the Divine offering, even on a day they powered the Nasdaq
composite index to a 143-point gain by gobbling up technology stocks.
Divine's first-day performance, dropping 2 percent below its offering price, also lagged well behind recent
IPOs at other firms. Since the beginning of April, the average IPO's price jumped 36.1 percent on its first day
of trading, according to figures from CommScan LLC, which tracks IPOs.
Divine did manage to raise $128.6 million with the IPO, although that was far below the $460 million it once
expected to bring in. Because it completed the IPO, the company now will receive an additional $218.6 million
from private investors, including Microsoft Corp., Compaq Computer Corp. and Level 3
Communications. Tribune Co. also has an investment in Divine.
How Divine will use the money it has raised isn't clear.
Back in the good old Internet days four months ago, before the Nasdaq stock market collapsed, Filipowski
talked about building a $62.9 million campus at Goose Island and opening offices around the world.
Now, analysts say the company needs to marshal its resources and prove itself by fulfilling its stated
mission—fueling the rapid growth of young Internet companies and launching them successfully into the
public markets.
"They will probably scale back a little bit in terms of the scope of their international expansion," said Ullas Naik,
senior vice president of research at First Albany Corp. in Boston.
And most analysts don't expect Divine's stock price to jump any time soon.
"It's going to have problems as a stock, probably until the third quarter," said James Dascoli, head trader at
New York-based McKinley Capital Partners, whose firm purchased a small amount of Divine stock. "It's an
early stage company, and right now the markets are not willing to give early stage companies the benefit of the
doubt."
Many people concerned about the growth of the Chicago technology community breathed a sigh of relief
Wednesday as Divine, which was originally positioned as a high-tech savior to the Midwest, was able to clear a
critical hurdle.
"It has hurt Chicago, but now that Divine is public alleviates a lot of the concern and negativism that had
been associated with Chicago as a result of Divine's problems," Pritzker said.
Before Wednesday's IPO, the company was forced to cut its offering price and delay the IPO seven times
because of a lack of investor interest and Securities and Exchange Commission concerns about publicity
surrounding the deal.
These delays, along with a diminished appetite on Wall Street for unproven Internet firms, led to the market's
cool reception. Many analysts wrote off Divine as a dud in the weeks leading up to the offering, saying they
doubted the company could even complete its IPO.
"There were some questions about why they weren't able to take it out," First Albany's Naik said. "It just sort
of fed on itself, the lack of enthusiasm."