Netscapes Initial Public Offering

Background The case deals with initial public offering of Netscape. The company is just more than a year old and has not broken even yet. However, its products, especially the Netscape Navigator is doing very well and has a huge and dominant share of the market. The initial feedback from the investors has been very good and has been highly oversubscribed. The board is under a dilemma about whether to increase to share offering price from its initial value of $14 to $28. A decision needs to be taken on the same. The worry is that the increase in price should not be seen as an opportunistic move by the company to just make some money. Analysis The company is very young and has not even broken even yet. The current business model of the company basically gives away the software for free to users. Though this has helped the company to gain a market share, it is not clear about how economically viable this will be in the long run. The code on which the software is based is being sold by SpyGlass to many other competitors. So the company would lose the technological edge that it currently holds against its competitors. A major worry would be the fact that Microsoft plans to enter the same market soon. With its deep pockets, Microsoft could easily drive Netscape out of the market, especially since their software would be based on the same technology as Netscapes. The good response to the companys proposed IPO is mainly due to the high market share that Netscape has along with hopes that the internet as such is expected to grow in leaps and bounds. Since the company is yet to make any profits, a high IPO price is the only opportunity for the management to make any money. Hence an attempt to increase the share price would mostly be regarded as an opportunistic one. The underwriters and the other Investment Banks would also stand to benefit from an increased price. Hence their attitude would be biased.

Conclusion Taking all these factors into consideration, in increased share price would be unadvisable as it might create negative waves in the market regarding the company which might lead to the IPO being a failure, or the shares of the company crashing soon after the IPO.