Wall Street welcomes the cyber contender

Wired, the fashionable but loss-making magazine, is the latest in a series of Internet-related stock offerings to cash in on Wall Street's cyber frenzy, which in the past year has seen stock in other loss-makers such as Yahoo! reach astronomic levels.

Goldman Sachs, which will be handling the initial offering, announced last week that Wired Ventures, which publishes the magazine, would be offering investors 6.3 million shares - or roughly 17 per cent - of the company at $12 (pounds 7.80) a share.

The sale should raise $76m and result in a market capitalisation for the company of around $565m. This is a figure that has left many analysts questioning the wisdom of what Goldman Sachs calls "hi-tech investment opportunities".

Wired is a monthly magazine devoted to the Internet and cutting-edge computer technology with a circulation of 325,000. Spin-offs include an Internet edition, HotWired, and a start-up book publisher, HardWired. It has also announced plans to introduce HotBod, a "web browser" to help Internet users navigate around cyberspace.

The magazine, which routinely features media celebrities such as Microsoft's Bill Gates, TCI's John Malone and Bell Atlantic's Ray Smith in irreverent poses on its cover, is credited with making the nerdish world of computer technology hip. It was founded in San Francisco in 1993, and was the first magazine to portray the culture of cyberspace. It has managed to convince Americans that they need to buy the magazine in order to keep up with the digital world.

The good publishing stamp of approval was bestowed in 1994 when SI Newhouse, owner of Advance publications, which includes the Conde Nast magazine titles and Random House publishers, acquired a reported 15 per cent stake in Wired Ventures for $3.5m.

If the offer is successful, his investment will be worth some $67m.

The Wired offering, which is expected in late July, will leave 37.5 million shares outstanding and make paper millionaires out of some of its editors and journalists.

Founding editor Louis Rossetto's 6 million shares will be valued at $71.3m and Nicholas Negroponte, computer visionary and director of the Media Lab at the Massachussetts Institute of Technology, will enjoy a stake valued at $29m.

Alhough Wired is the most recognisable publication devoted to computer innovations - "smart media for smart people" - many analysts judge the $12 share price (at nearly 18 times the company's 1995 revenue) as speculation reminiscent of the great tulip craze of 18th-century Holland. "A magazine in the US typically sells for within one to two times its gross revenue but Wired is being priced at 171/2 times that," says New York-based media consultant, Martin Walker. "There is no magazine in the world with a 325,000 circulation that's worth that kind of money.

"They're suffering from Silicon Valley fever."

According to its latest report to the Securities and Exchange Commission, Wired Ventures lost $3.4m on sales of $7.6m in the first quarter of the year. Last year it lost $6.5m on sales of $25m and $3.5m on revenue of $9.2m in 1994.

HotWired has yet to show any revenue at all. As an Internet magazine, it cannot charge a subscription so has to rely on advertising revenue. But, Mr Walker says: "Advertisers are unable to measure the impact of their advertising."

Nor has Wired's venture into Europe been successful. Its joint venture with the Guardian broke up acrimoniously last year, and the European edition is struggling to find a niche.

This is not the first time Goldman Sachs has underwritten a company that carries the magic word "Internet" but lacks a proven means of revenue. In April, it underwrote Yahoo! - the Internet company whose software searches the net for specified information. At an opening price of $13, shares instantly soared to $43 (valuing the company at an astonishing $1.1bn) before dropping $33 at the end of the first day's trading. Last week Yahoo! shares were at $28 - still 528 times the company's revenue.

Whether Goldman Sachs is lending its name to an offering of virtual junk or, as the Wired Ventures offering statement says, "a new kind of global, diversified media company engaged in creating a competitive, branded content with attitude for print, on-line and television" is for investors to judge.

"Outside of a lot of excitement Wired hasn't proven itself in any way," says Mr Walker. "I can't say that [the offer] is crazy or wrong because the market decides. But whatever it is that they smoke in California, they don't smoke it here."

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Life and Style
life
Arts and Entertainment
Cold case: Aaron McCusker and Christopher Eccleston in ‘Fortitude’
tvReview: Sky Atlantic's ambitious new series Fortitude has begun with a feature-length special
Voices
Three people wearing masks depicting Ed Miliband, David Cameron and Nick Clegg
voicesPolitics is in the gutter – but there is an alternative, says Nigel Farage
Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
News
i100
News
people
ebooks
ebooksA special investigation by Andy McSmith
Sport
Chelsea manager Jose Mourinho
footballThe more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Life and Style
Vote green: Benoit Berenger at The Duke of Cambridge in London's Islington
food + drinkBanishes thoughts of soggy school dinners and turn over a new leaf
News
Joel Grey (left) poses next to a poster featuring his character in the film
peopleActor Joel Grey comes out at 82
News
i100
News
business
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee