History 2002: Last Great IPO from StorageNetworks

In the history of the storage industry’s performance on the US stock market, one event will forever mark a turning point. There will always be the before- and after-StorageNetworks.

The company, founded in 1998 by a team that included current CEO Peter Bell, formerly of EMC, pulled off one of the sweetest IPOs, followed by an equally spectacular fall that left more than one investor feeling burned.

In 1999, the storage service provider model was expected to transform the IT technology world. That year, the young seedling known as StorageNetworks was named Best of Venture Market East 1999 by Red Herring, the bible of IT VCs.

The firm raised $50 million during financial round B and more than 2x that in round C.

For its IPO on June 30, 2000, shares were priced at $27. But after a 2-hour frenzy of flipping and re-buying among institutional investors during the morning, the stock opened for trading at $92. It went as high as $102 before closing at $90.

On that day, StorageNetworks raised $260 million. It was the darling of Wall Street.

Its market capitalization was $8.5 billion. Now, however, that sum has been reduced to only $187 million, and the share price is less than $2!

The company has never posted a single profitable quarter, and has lost nearly $285 million since January 1999.

At least it still has more than $189 million in cash to play with in the future.

This article is an abstract of news published on issue 175 on August 2002 from the former paper version of Computer Data Storage Newsletter.