Digital Domain enters IPO ring

Meanwhile, Classmates.com parent scraps spinoff plan

The market for initial public offerings is getting interesting, with a special effects company filing for an IPO and a social networking firm canceling one.

The VFX company, Digital Domain, wants to raise about $100 million to pay off debt and maybe produce films, apparently in an attempt to compete with 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.

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.

That 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.

Investors punished United Online on Wednesday, 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.
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