Bank technology stocks are taking a beating as the broader market slides.Verisign Inc., which issues and manages digital certificates, closed Friday at $97.8125 down 62% from its high of $258.50, which it reached March 1. HNC Software Inc., a credit card fraud-prevention specialist, closed at $48.875, down from a high of $127.75, on March 10.
Despite S1 Corp.'s blue-chip customer base of 650 financial institutions, including 40 of the world's 100 largest banks, it has been caught in the downdraft, too. Its stock closed Friday at $46.98 down from its high of $142.25, on Feb. 16.
Charles Ogilvie, S1 Corp.'s general manager of the Americas for the Atlanta-based Internet banking software company, said investment standards for Internet companies are rising - and deservedly so.
"Clearly, people are trying to figure out if everyone is overvalued," Mr. Ogilvie said. S1's market capitalization, which had reached more than $7 billion, is down to around $2.4 billion. "I can argue that it is still kind of irrational," Mr. Ogilvie said.
Technology-related initial public offerings and secondary offerings have dried up, with a few notable exceptions, said Jeffery Baker, analyst at SunTrust Equitable Securities.
Corillian Corp., a rival of S1, went ahead with its IPO last Wednesday, offering four million shares at $8 each, well below the $10 to $12 price range suggested by Credit Suisse First Boston, its lead underwriter. Mr. Baker said it took "guts" for the Beaverton, Ore.-based company to go through with its IPO and that he doubts the market will see many like it in the near term.
"The environment is changing," he said. "Overall, the business models are coming under increased scrutiny. People are looking for good top-line growth, good management teams, and expanding margins and are not as likely to wait for profitability." He added, "A lot of venture capitals have said they will no longer invest in vertical marketplaces; they will focus on infrastructure plays."
Gary Craft, an analyst at Deutsche Bank Alex. Brown, applauded Corillian and its underwriters for putting together a deal in adverse conditions. Corillian "obviously has a blue-chip image and has been making inroads against S1," he said. "Corillian must have something really working in its favor to have gotten the deal priced. Hats off to them."
Mr. Ogilvie welcomed Corillian's IPO, saying it will give his company a healthy dose of competition, which is ultimately good for customers and market expansion.
"I think it is great that they finally are public, because it is different to run a public company than it is to run a private company. When you actually have to make numbers, that levels the playing field from a competitive standpoint."