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Tuesday, June 22, 1999 Published at 21:22 GMT 22:22 UK

Business: The Company File bores Wall Street audience

The Online magazine has failed to impress during its first day on Wall Street, as its shares dropped below the set price for its 'initial public offering' (IPO).

The San Francisco-based company planned to sell 2.5 million shares or 23% of its stock on the Internet's favourite stock exchange, the Nasdaq, for about $10.50 each.

Similar Internet stocks have seen their price go through the roof during the first day of trading., for example, floated last year and gained more than 1,000% during the first day of trading, surging from an offering price of $9 to $97, before closing the day at $63.

Salon, however, appears to have come too late to the market. The frenzy to snap new share issues is over, and top Internet stocks like eBay and are well down on the highs reached this spring.

At the end of trading, shares sold for $10, after having sunk as low as $9.8125.

Internet share auction

One possible reason for Salon's flop may have been the company's gamble to be friendly to Online investors.

When new companies are floated on the stock exchange, normal investors rarely have a chance to snap up shares at the offering price. Large banks and institutional investors get the first bite.

Small investors only get a piece of the action once the price has moved up sharply, and the big players get out of the shares making a tidy profit.

Salon tried to do things differently, offering its stock not at a fixed price. Rather, investors were able to bid on the stock under an auction format called the "OpenIPO."

W.R. Hambrecht+Co, which developed the new system, described it as a fairer way to price new issues, by giving individual investors more power to set the price.

Salon is a free online magazine, covering subjects ranging from politics to technology to literature. The company had hoped to use the proceeds from the IPO to expand.

For Salon, the result has been a disappointment. However, whether it is the auction system that is to blame, or a general disenchantment with Internet stocks, is difficult to say.

One reason for the Wall Street flop may have been the business model. Compared to other online sites, the magazine has only a relatively small - albeit loyal - audience.

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Salon IPO information

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