WP Nasdaq listing to test internet sector
Wirtualna Polska's (WP) desire to go public on the U.S.'s Nasdaq stock exchange by summer 2001 may pave the way for other Central European internet companies to list themselves on foreign exchanges, IT analysts said last week.
The company stated its intention to do an offering within the next 18 months, a move that would make it one of the first home-grown internet companies started by Central Europeans to go public.
In December, WP said that more than 45 million people had visited its site (www.wp.pl), and the company claims to attract 33% of all internet advertising in Poland. Though its advertising income for December alone amounted to zl. 1 million ($256,000), the company, which employs 60 people, is still racking up losses due to large investments in the expansion and marketing of its site.
"We are going to be profitable when the Polish internet business develops," said WP President Marek Borzestowski. "The internet is more accessible and there are more and more computers in the country."
Analysts said a WP offering might be attractive as it gives investors exposure to the relatively untapped internet market in Poland. "Buying (shares in) a market leader ... might be attractive," said Dariusz Turkiewicz, an IT analyst at CDM Pekao Securities, about WP.
But the stock may initially carry a stigma as a Central European internet company. Turkiewicz did acknowledge that the newborn state of Poland's internet market, combined with the country's emerging-market status, may make the offering especially risky.
"The risk of the investment is obvious," he said.
Up against a glut of internet stocks in the United States, WP could also experience some difficulty in getting its story out, analysts said.
"For a Central European company (that wants) to go abroad, getting attention and marketing on the Nasdaq exchange could be very tricky," said Johannes Weyringer, an analyst with Raiffeisen Capital and Investment.
Other analysts, however, were generally optimistic about investing in WP. While Poland's internet potential remains unclear, a range of IT companies are pumping money into ventures. Domestic media company Agora recently announced its intention to plow zl. 40 million ($9.76 million) into the internet by the end of 2002. Custom software maker ComArch also plans to invest zl. 16 million ($3.9 million) in Internet FM, which owns the Interia.pl portal. Venture capital firms are additionally expressing interest.
"It's probably worth risking some part of a portfolio," said Tomasz Mazurczak, head of research with Dom Inwestycyjny BRE Banku.
One analyst, who asked not to be named, estimated WP's book value at $30 million-$40 million. The percentage of Wirtualna Polska's shares to be issued and how much the company hopes to raise from the floatation are unknown as details are still being worked out, Borzestowski said.
Despite the potential obstacles to an offering, WP is already mentally spending the cash raised. "We would like to spend this money on electronic commerce and a distribution system," Borzestowski said.
Because the company is private, analysts said it was difficult to estimate how much money WP could raise in the offering. But Dom Inwestycyjny BRE Banku's Mazurczak gave a rough estimate: "I don't think they will need more than $10 million."
CDM Pekao Securities' Turkiewicz disagreed, however, noting that if Wirtualna Polska is to hold a leading position in the national internet market, then it will need around $100 million in capital for future acquisitions and expansion. "If you want to be a leader, you have to make huge investments," he said.
One reason analysts believe the shares in WP may be attractive is that the internet is still new and small in Poland, unlike in the United States and Western Europe, where many lucrative niches have already been filled.
"The growth from the embryonic stage to the developing stage is much faster than the developing stage to the maturity stage," said Jacek Radziwilski, an IT analyst at Deutsche Bank Research.
WP's Borzestowski also pointed to the large number of Polish emigres living in the United States, many of whom have inquired about investing in WP. At the same time, Pawel Puchalski, another analyst at Dom Inwestycyjny BRE Banku, said that WP's flotation might help other Polish ISPs get onto the Nasdaq.
Going public on the Nasdaq offers several practical advantages, analysts said. For example, quotation requirements are less strict on the Nasdaq than on the Warsaw Stock Exchange (WSE), they said.
"WSE regulations do not allow companies with losses in the past or with insufficient histories to be listed," Radziwilski said.
A Nasdaq listing can also result in a higher share price since a deeper base of capital exists in the United States. Listing on the exchange is also somewhat of a status symbol, analysts said.
"Right now it will give our ITs more prestige to be quoted on the Nasdaq," Puchalski said.
Going to the Nasdaq could also indirectly bring positive results to one of WP's main investors, Prokom, which acquired a 25% share in WP in September 1999. "It should also positively impact Prokom's price on the WSE," Radziwilski said.
