Internet Music Firm MP3 Worth Billions Overnight
LOS ANGELES -- After slightly more than a year in the Internet music business and with no proprietary claim on the technology it helped popularize, MP3.com Inc. sold shares to the public Wednesday and immediately became a multibillion-dollar force.
The San Diego company is the most popular web site for those seeking free or nearly free music to download.
While it hopes to make money by splitting music revenue down the middle with bands, the lion's share of the less than $700,000 it had in sales during the first three months of this year came through advertising.
After the investment banks underwriting the sale of 13 million shares more than doubled the initial price to $28, the stock exploded to open for public trading at $105, briefly giving MP3 a market value of about $6.9 billion, just below the market value of EMI Group. The stock finally closed for the day at $63.31.
"They are the beneficiary of the right name, the right dot-com address, and the right time,'' said Mark Hardie, a senior analyst at Forrester Research. "The market place is just very heated with theoretical expectations.''
The debut ranks with those of E-Toys, MarketWatch.com and other recent Internet rockets, and it makes an instant billionaire out of 38 percent owner and chief executive Michael Robertson, 32, a former computer programmer who has now become the scourge of the music industry establishment.
Others profiting handsomely are Silicon Valley venture company Sequoia Capital, Cox Interactive Media and singer Alanis Morrissette.
Morrissette's management company, Atlas/Third Rail, obtained warrants to buy 658,000 common shares at 33 cents each in exchange for making MP3 a 1999 summer tour sponsor, according to regulatory filings. At Wednesday's closing price, that's more than $40 million in profit, at least on paper.
In an interview last year, Roberston defended his site's hints to consumers for circumventing industry efforts aimed at stopping digital music from being pirated.
"Theft is a cost of doing business on the Internet,'' Robertson said. "I know the giant companies have spent more than a year trying to develop a universal encryption and 'watermark' security system, but I guarantee you the minute they unveil the thing, some hacker will figure out a way to get around it. It is impossible to secure digital music.''