The year in Illinois IPOs brings to mind the tale of the tortoise and the hare. Overhyped Internet stocks charged out of the starting gate, only to be overtaken by profitable old economy veterans at the finish line.
If there's a lesson for investors, it's that stocks shouldn't be valued on the surrounding media buzz, but by the earnings they generate.
A dozen Illinois-based firms made their debut in 2000, most of them technology-related.
Overall, the Windy City had the wind knocked out of it: The rookies are down an average of 23 percent for the year.
The collapse of Internet stocks, and the revival of old-line firms, is most evident in divine interVentures and Packaging Corp. of America.
Among all local offerings, none generated more media buzz than divine. The Internet holding company would put Illinois on the dot-com map, according to its most fervent supporters.
But divine, launched in mid-1999, was late to the Internet party. Trying to make up for lost time, it immediately carpet-bombed the region with funding for dozens of unproven start-ups. By the time divine tapped the public markets in July, however, its ambition to create a Midwestern Internet cartel was coming apart at the seams.
Divine is now on pace to lose a staggering $ 350 million this year.
Although Packaging Corp. of America hails from the same state as divine, it might as well be another planet. The Lake Forest company has existed in one form or another since 1867.
The exceedingly dull business of containerboard manufacturing is PCA's specialty. The IPO suffered a lackluster opening in January.
But PCA is a standout company by virtue of generating greater profitability than any other Illinois IPO this year. The stock has steadily gained steam, and the company is now valued at $1.5 billion, more than six times the market capitalization of divine.
Cabot Microelectronics is another stock that has fared well because it generates solid earnings. Aurora-based Cabot supplies materials used in the production of computer chips. After a modest gain in its April debut, the stock has nearly doubled in the aftermarket.
Not all Internet-related IPOs flopped. Despite the dot-com carnage, Click Commerce has managed to swim against the tide. Nevertheless, it'll be tough for the stock to sustain its lofty valuation, considering it isn't expected to have a profitable year until 2002.
The downfall of unprofitable IPOs has also taken a chunk out of a few established companies. Rosemont-based Comdisco reached an all-time high in March, propelled by planned offerings for its telecommunications and venture-capital units.
As these plans fell apart, so did its stock, which recently reached its lowest point in three years. Management recently indicated it will refocus on its core hardware-leasing operations.
Comdisco and the IPO market illustrate that everything old is new again. This region may not be a leading hub for Internet start-ups, but it does have many strong businesses in established industries.
Such old-line firms may lack the flashiness of the dot-com world, but they are much more likely to generate cash rather than burn it.
And when valuing stocks, that's what matters most.