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
Arts and Entertainment
Ben Stiller as Derek Zoolander in the leaked trailer for Zoolander 2
film
Sport
footballArsenal take the Community Shield thanks to a sensational strike from Alex Oxlade-Chamberlain
Arts and Entertainment
Gemma Chan as synth Anita in Humans
film
News
Keeping it friendly: Tom Cruise on ‘The Daily Show’ with Jon Stewart
people
Arts and Entertainment
Ensemble cast: Jamie McCartney with ‘The Great Wall of Vagina’
artBritish artist Jamie McCartney explains a work that is designed to put women's minds at rest
News
Republican Presidential Candidate Donald Trump
people
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: DBA Developer - SQL Server

£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Customer Service Administrator

£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

Recruitment Genius: Dialler Administrator

£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

Ashdown Group: Contracts Manager - City of London

£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen