Firm's IPO turns sour

Shares of Inc., the Internet financial services company started by Baltimore broker Nathan A. Chapman Jr., plunged 43 percent yesterday in their trading debut.

The shares, which trade under the symbol ECMN on the Nasdaq stock market, were priced Thursday at $13 each, but fell $5.625 a share to close at $7.375.


The dive erased $81.3 million from's market capitalization, which fell to $106.6 million from $187.9 million by day's end.

"It is probably one of the worst ones [trading debuts] I have seen," said Michael Falbo, an analyst at in Boulder, Colo., which tracks initial public offerings. "I think you are always judged on your first day. It always sticks in investors' minds."


Others were also stunned by the performance.

John R. Boo, head of Nasdaq trading at Baltimore-based Ferris, Baker Watts Inc., said he was surprised that the company, which used its own brokerage subsidiary to underwrite the offering, wasn't able to generate more interest in the stock, at least in its first day of trading.

"You always want to make sure that any deal you are doing is comfortably oversubscribed," he said. "I am disappointed by the price and disappointed by the amount of ... interest that we have seen."

Nathan Chapman could not be reached for comment. began trading about 11:20 a.m. yesterday, three business days after it sold 1.26 million shares to raise $16.4 million. The company has more than 14 million shares outstanding, and Chapman, who is chairman and president, owns more than 60 percent of the company. is the third company Nathan Chapman has taken public since February 1998. Then, he took to market his flagship Chapman Holdings Inc., a Baltimore-based brokerage and investment banking firm, which raised $6.8 million. Six months later, he took a second company public, Chapman Capital Management Holdings Inc., an investment advisory firm, raising $5.5 million.

Both companies ceased trading on the Nasdaq yesterday after being folded into eChapman. Chapman Insurance Holdings Inc., a third company that is not publicly traded and sells insurance products, was also merged into the company.'s ambition is to build a Web site and become a leading online financial company selling brokerage services, mutual funds and insurance products over the Internet. It also hopes to establish an Internet bank.


To widen its audience, eChapman plans to offer lifestyle, educational, sports and cultural content that appeals to African-Americans, Asian-Americans, Hispanic-Americans and women.

But there are many risks associated with the newly formed company, according to the prospectus.

Chapman's businesses collectively have struggled, losing $4.5 million in 1999, and $830,000 in the first three months of this year. Its Web site is still under development; its investment advisory subsidiary is dependent on "a few" major clients that could impact revenue if they stop doing business with the firm; and competition for customers over the Internet is fierce.

"It is a terrible industry to be involved in, anything that is niche marketing online," Falbo said.

Some Internet companies have recently reduced their initial public offerings simply to get them done, he said. One company even pulled its deal from the market after it received backing from a venture capitalist.

Like the others, scaled back its deal after initially planning to offer as many as 3.33 million shares to raise more than $50 million, Falbo said.


"It seems they are sort of pushing this deal through," Falbo said. "If you don't have anywhere else to go, you have to push it through the door."