JASON BOOTH

Staff Reporter

Never mind all the hoopla over new Internet stocks it’s been a tough year for most L.A.-based IPOs.

Of the five companies that have launched initial public offerings since the start of the year, three have seen their share price fall below the issue price. Another is up slightly, while only Internet toy retailer eToys Inc. has made substantial gains.

As a result, any investor who bought into all the L.A. IPOs over the last six months would have posted a slight loss.

“I’m not surprised,” said Gail Bronson, senior analyst for IPO Monitor, a Web-based firm that tracks the public offering market. “The entire IPO market has been cratering.”

The total current return on all IPOs launched in the first half of the year nationwide was running near 30 percent as of late last week down from over 50 percent just the week before. And the nationwide return is somewhat inflated by Internet-related companies coming out of Silicon Valley, some of which are up more than 400 percent despite the correction that has hit tech stocks.

The overall weakness in local IPO stocks comes despite the fact that eToys was up more than 87 percent from its offering price last week, closing at $37.50 on June 16. The online toy retailer rocketed out of the starting gate on May 20, peaking at $76 after launching at $20.

Since then, however, the stock has steadily declined largely because of profit taking by investors and a general round of selling on Internet-related stocks.

“You can’t look at the $76 level as representing real value. It was a product of IPO hype,” said David Horwich, senior vice president for corporate finance and investment banking at First Security Van Casper. “Now eToys has been caught up in the whole sell-off of Internet stocks.”

Korn Ferry International has shown moderate success since it went public on Feb. 11. As of last week, the stock of the executive search and placement firm was up about 7 percent from its IPO price of $14.

But the three remaining IPOs launched locally this year have been disappointments.

Athletic-shoe maker Skechers USA held its IPO on June 9 with an initial price of $11 per share. But that was only after the price was reduced from the original range of between $13 and $15. Even with the discount, Skechers’ share price has slumped, trading last week at $10.50.

“Skechers has been hit by the double whammy of coming out in a depressed market and not being an Internet stock,” said Bronson.

The sharpest fall was seen by Digital Lava Inc., which is down more than 60 percent from its IPO on Feb 17. The company creates software that enables businesses to compile and edit video images that can be used on personal computers for business presentations and training purposes.

Launch Media Inc., meanwhile, has seen its share price fall 40 percent since it went public on April 23. The company publishes an Interactive music magazine on CD-ROM and on the Web.

Investment bankers said the relatively small size of these companies has worked against them.

“A lot of institutions just won’t touch a company that has a total capitalization of under $300 million,” said Scott Wendelin, managing director for investment banking at Sutro & Co. in West Los Angeles.

Launch Media’s current market cap is just over $200 million, while Digital Lava’s is less than $50 million.

This is hardly the first year L.A. IPOs have fared poorly. Of the 12 local companies that went public in 1998, only four are currently in positive territory. Seven are down between 30 and 70 percent from their offering price.

So will IPOs in the second half of the year prove to be any more successful?

The next local company scheduled to go public is Careside Inc, a Culver City firm that develops blood-testing systems. That IPO is priced at $7.50. Then there are a couple of Internet-related companies.

Internet search engine GoTo.com Inc. of Pasadena is expected to go out at between $11 and $13. JFAX.com Inc., a Los Angeles firm that provides Internet-based messaging services for e-mail, fax and voicemail, likely will be priced in a range of $9 to $11.

With sentiment toward Internet stocks shaken by recent losses, GoTo and JFAX might be tough sells. And because stock market trading typically slows in the summer months, all three IPOs may have a hard time attracting attention.

On the positive side are indications that investors are becoming more interested in smaller companies.

The Russell 2000, which tracks smaller companies, has risen almost 9 percent since early April, while both the Nasdaq and S & P; 500 indexes have remained flat.

“We are starting to see a broadening out of the small-cap market,” said Horwich. “Since April, the Russell 2000 has outperformed the S & P; by 2 to 1.”