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Chello IPO set to top week
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June 4, 2000: 7:15 a.m. ET
Dutch broadband company should do well outside of ONI's shadow
By Staff Writer Kim Khan
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NEW YORK (CNNfn) - A Dutch Internet service provider and a company that manages rural hospitals lead the list of IPOs debuting this week.
Chello Broadband's nearly $370 million initial public offering and Community Health Systems' $300 million deal are likely to be the highlights of an otherwise quiet week.
Still, neither one is likely to surpass the spectacular debut of ONI Systems last week. ONI, which enjoyed the strongest first day since Arrowpoint Communications jumped 248 percent in March, proved the IPO market is far from dormant with a 230-percent gain in its first day of trading.
High-speed Internet service provider Chello is a holdover from the previous week. The company said it moved pricing because it was in strategic negotiations, which might affect its value. Chello was reportedly in talks with UK cable operator Telewest Plc., but neither company confirmed the talks nor released any further news.
The delay could translate into extra cash for Chello. With the ONI (ONIS: Research, Estimates) offering completed, Chello holds the spot as the premier tech company coming public this week.
Irv DeGraw, research director at WorldFinanceNet.com said pre-offer demand has been accelerating for Chello. DeGraw said the fact that a top investment bank like Goldman Sachs is leading the deal, also could help it.
Corey Ostman, Chief Technical Officer of Alert!IPO, said the company's international presence will help spur demand.
"Broadband is cool, it's all about infrastructure, and the fact that Chello is bringing it to so many European countries will help it," Ostman said.
Chello will trade on the Nasdaq under the symbol CHLO. The company plans to price 26.9 million shares between $11.88 and $15.53, raising about $368.7 million.
The other big deal of the week, Community Health Systems Inc., could fall flat according to analysts. The Brentwood, Tenn. company owns 50 hospitals in 20 states, concentrating on rural markets.
"I try to ask, 'What makes me believe that these guys can do this any better than their predecessors?'" DeGraw said. "I don't see much."
He added that with low hospital traffic in rural areas and with the company at the mercy of Medicare and Medicaid rulings in Washington, investors will not be anxious to buy the shares.
CHS plans to raise about $300 million, pricing 18.75 million shares between $15 and $17. The company plans to use most of the money its IPO raises to retire debt. In 1999 the company had sales of more than $1 billion, but lost nearly $17 million. Merrill Lynch is leading the deal and the company will trade under the symbol CYH.
eChapman.com, a financial Web site that targets minorities, is also scheduled to trade for the first time this week, but analysts said the company may have missed the window for strong dot.com debuts.
"A lot of these kinds of niche sites did really well," Ostman said. "It will be interesting to see how (eChapman.com does) now that the market is completely different."
Instead of working with an investment bank, eChapman.com is underwriting its own offering. DeGraw said that a company trying to save money by self-underwriting, combined with no earnings and a reduction in price range equals a bad deal.
"Everything is wrong with this deal," DeGraw said.
The Baltimore-based company plans to trade under the symbol ECMN. In 1999 the Web firm had revenue of $6 million and lost $1.6 million. 
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