Classmates Media Corp., which was expected to spin off from Internet and media services company United Online Inc. with an initial public offering this week, has canceled the proposed IPO.
Classmates owns the social-networking Web site Classmates.com.
United Online said it determined that proceeding with the IPO under current market conditions would not be in the best interests of its stockholders.
United Online expects to book fourth-quarter charges of $4.5 million to $5.5 million in connection with the withdrawal. The company noted that the costs may be higher or lower than its preliminary estimate.
As the stock market continues to be roiled by a housing slump and credit market deterioration, the market for IPOs has also suffered a downturn.
The company's decision to cancel its IPO follows disappointing debuts Tuesday for ChinaEdu Corp., which provides educational services in China, and ATM operator Cardtronics Inc. Both companies priced at the low end of expectations and fell in their first day of trading.
In addition, some analysts expressed doubts about Classmates' ability to sustain paid subscription growth, while rivals such as Facebook Inc. and News Corp.'s MySpace.com offer their services for free.
In SEC filings, Classmates also disclosed that its automatic subscription renewal policy is under a Federal Trade Commission probe.
Analysts also noted that users spend significantly more time on MySpace and Facebook than on Classmates.com. According to comScore Media Metrix, the average visitor spent about 8.3 minutes on Classmates.com Web sites in October, compared with 195.6 minutes on Facebook.com and 192.9 minutes on MySpace.com.
United Online said Classmates plans to withdraw its registration statement filed with the Securities and Exchange Commission.
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