Digital Domain enters IPO ring
Meanwhile, Classmates.com parent networks soloThe market for initial public offerings is getting interesting, with a special effects company filing for an IPO, while a social networking firm has canceled one.
The effects company, Digital Domain, wants to raise about $100 million to pay off debt and maybe produce films, apparently in an attempt to compete with the DreamWorks Animation and Disney's Pixar Animation, though an executive declined comment Wednesday.
According to a regulatory filing this week, Digital Domain intends to use its IPO proceeds for "expanding our technology development and licensing program and attempting to enter into the production of animated and visual effects-driven feature films and the development and production of video games."
Some, however, question whether the IPO will really happen.
"In some ways they're equivalent to Pixar, but nowhere near as big," said Tom Taulli, who runs IPO Web site DealProfiles.com. "Perhaps they put out a prospectus in hopes of attracting a buyer for the company."
For the first nine months of the year, Digital Domain lost $15 million on $56.6 million in revenue. The company's projects include effects for the films "The Curious Case of Benjamin Button" and "The Mummy: Tomb of the Dragon Emperor."
Meanwhile on Wednesday, United Online canceled its spinoff and IPO of Classmates Media, which runs the Classmates.com networking site and MyPoints, an Internet marketing and e-commerce loyalty firm.
Classmates.com competes with Facebook, MySpace and CollegeHumor.com, though most directly with Reunion.com.
United Online, which also owns such Web properties as NetZero and Juno, couldn't sell Classmates.com shares at a time when social networking is supposed to be a hot industry is particularly telling, observers said.
Consider, for example, that a Microsoft investment in Facebook values the company at a whopping $15 billion and that News Corp. paid $580 million for MySpace early last year.
Investors punished United Online on Wednesday for its failure to take Classmates public, bidding shares of the company down 8.7% to $11.25.
Observers have noted lately that Classmates, while boasting 50 million registered users, only has about 3 million who pay about $3.33 a month for the premier service, and Facebook and MySpace are expected to do for free what Classmates charges for. Plus, many of the 50 million registered users aren't very active.
According to Taulli, when it comes to social networking: "You've got your handful of winners, like Facebook, MySpace and YouTube, but the business model hasn't evolved. When they try to monetize their sites, they anger their users. It will take a couple of years to experiment and refine the models."