000217 Online Cattle Mart Emerge Shares Soar

New York - Shares of Emerge Interactive Inc., an online marketplace for the cattle industry, more than quadrupled in its Wall Street debut as it attracted interest from cattle industry players to investors trying to get in on the next business-to-business play.

Shares of the Sebastian, Fla. business-to-business company climbed more than 340% to 66 on the Nasdaq after its $15 a share IPO of a total of 8 million shares raised $120 million.

It had initially planned on raising about $96 million. The deal represented a 25% stake in the company.

“It's an exciting company. It is obviously the first for the livestock business and for them to come in from the outside, inject capital and think 'outside of the box,”' said Tom Tippen, Chief Executive of Professional Cattle Consultants in Oklahoma, an investor in eMerge. He has also sold a part of his company to eMerge.

Its competitors include not only the traditional cattle auction services but also video cattle auction providers and other online competitors, according to its prospectus.

Internet Capital Group Inc. and Safeguard Scientifics Inc. are investors in the company.

Mention of the cattle business may conjure up images of cattlemen on the range on horses, but the reality is that the cattle industry has turned more and more into big businesses and the Internet is beginning to find a place in the industry.

“Everything is going that way. I guess we will get there some way too,” said Jim Gill of the Texas Cattle Feeders Association, adding that one of the obstacles will be getting people to use it. “It will take time for people to get used to it, but they will.”

Tippens said the industry might not have been ready for a company like eMerge two years ago but was ready now.

“It's great for the industry. It needs to be brought into current times and find ways to do business in a better way than in the past and they have a great company philosophy,” he added.

Not everyone, however, was enthusiastic about the company.

“I had concerns about the ability to create a virtual market for a living product and I am still concerned in the long-run, but it is running on the business-to-business wave and over the long-run it will erode significantly,” said Irv DeGraw, research director at WorldFinanceNet.com.

He added that eMerge was still a very small operation and still sports negative gross profit margins. Neither the size of the sector, the acceptance of virtual auctions versus direct examination of cattle, nor the validity of the business model were clear or proven, De Graw said.

RETURN TO HOME PAGE

E-mail: sflanagan@sprintmail.com