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April 1, 2000

The Electronic Roadshow

By Omar Sacirby

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  • The Electronic Roadshow

The revolution in web-based trading is sweeping through the IPO market.

Now electronic investment banks are lining up potential deals in anticipation of new Securities and Exchange Commission guidelines for online roadshows.

These roadshows are the latest foray by firms serving individual investors who seek the advantages of institutions.

The dog and pony spectaculars also promise institutional investors an opportunity to see management presentations they might have missed because of either time or geographic constraints.

The potential online audience is relatively substantial. An average of 10 percent more investors view online presentations than conventional presentations, according to David Baumann, chief executive of the Investor Broadcast Network, a provider of online presentations.

Companies planning public stock offerings and their underwriters offer encouragement. "It's good to be moving in this direction," said Cindi Buckwalter, senior managing director of corporate finance at Whale Securities Co. The firm is "strongly considering" an online roadshow for an upcoming deal. "The democracy of the Internet is allowing small investors to access this information," Buckwalter said. "It's time for that to happen."

Final Frontier

Internet investment bank, E*Offering provides a perfect example of an electronic roadshow. The bank's recent debut, available to the general public, was produced by NetRoadshow for Xcare.net Inc. (Nasdaq: XCAR), an e-commerce service provider for healthcare businesses that went public last month. NetRoadshow is owned by Yahoo! (Nasdaq:YHOO).

"This was the final frontier, a management presentation to the retail investor public," said Brad Hammond, president of NetRoadshow. "We have a medium that can support thousands and thousands of simultaneous investors."

The SEC has been allowing online presentations since 1997. But these are meant only for investment banks and their hand-picked clients. Access is gained via passwords. With the Xcare.net presentation, however, online presentations have crossed over the line to the general investing public.

Despite the breakthrough, one hurdle remains. Although it is not standing in the way, the SEC has yet to deliver ground rules for online roadshows. Providers of the service are hoping that a SEC rule will be issued this month.

The full-scale introduction of online roadshows has been in the pipeline since November when Charles Schwab & Co. filed a no-action request. The San Francisco-based discount brokerage giant asked the commission for permission to transmit online roadshows to its Signature Services retail customers. These customers were participants in IPO deals available via Schwab. Although the SEC had originally granted the request under certain conditions (and pending a final ruling), the agency later back-tracked. The guidelines expected this month should help clear the waters.

Simplicity

Launching an electronic roadshow is relatively simple. Companies can have it produced by one of several outfits. The producing company records the presentation, or Web-casts' the physical roadshow presentations for investors unable to physically attend. If the schedule does not suit an investor, the investor can still view the recorded presentation, archived on the company Web site, at a later time. "The fact that you can see it at three in the morning when you have time is a big bonus," Buckwalter said.

Convenience, efficiency and basic fairness are among the reasons in support of online roadshows. Executives dread the dawn-to-dusk demands of conventional roadshows.