In the heady days of the Internet bubble, all you needed was an idea. You could then take that idea and launch a public company worth hundreds of millions of dollars. A sound business plan? Profits? Nah! That was all so last century.
Are the good old bubble days on their way back? It certainly was a throwback to those times when health-care information provider WebMD (NASDAQ:HLTH) announced several months ago that it would be spinning off its WebMD Health division with a new IPO. For the first six months of 2005, WebMD Health reported a widening net loss of $2.5 million -- up from $2.2 million in 2004 -- even as revenues climbed to $74 million from $58.1 million over the same period. WebMD, which also changed its name to Emdeon (pronounced "M-D-On"), seeks to raise as much as $120 million with shares priced somewhere between $15.50 and $17.50.
In its prospectus, the company listed some competitors that also brought back memories of the bubble days: DrKoop.com and eMedicine.com. Most of these companies endured devastating blow-ups, and those that remain are just shells of their former selves.
The new company will be called WebMD Health and seeks to use the ticker symbol WBMD on the Nasdaq exchange. Emdeon will continue to use the WebMD brand and has two other subsidiaries -- WebMD Business Services and WebMD Practice Services -- through which it operates reimbursement and practice management services. A third subsidiary, Porex, manufactures porous plastic products for use in health-care procedures.
Though it will become a separate entity, WebMD Health will still be captive to its former parent. Emdeon will own 100% of the Class B shares that will be created as well as 87.5% of the Class A common shares, giving Emdeon more than 97% of the combined voting power. That's not exactly shareholder-friendly news to investors who may consider buying in.
But the reason an investor may want to buy shares in the new company is a different question. Fellow Foolish contributor W.D. Crotty noted that last year's numbers at WebMD, though appearing healthy on the surface, displayed some severe anemia when examined more closely. Acquisitions, not organic growth, fueled much of the company's revenue increases. The cash in the coffers may not have been all that it seemed, and the company was pricey based on earnings. It sports a P/E ratio of 69 on trailing earnings even today. Phil Wohl also questioned the company's performance last year, as did Roger Nusbaum, when he wrote about the company's search for "strategic alternatives" for its portals.
Considering the challenges WebMD Health faces from better financed companies such as McKesson (NYSE:MCK), Cerner (NASDAQ:CERN), or even troubled NDCHealth (NYSE:NDC), which is to be acquired by Per-Se Technologies (NASDAQ:PSTI), and the near-dictatorial control Emdeon will maintain over it, one wonders whether investors will really want to risk their money on an Internet bubble retread.
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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. The Motley Fool has a disclosure policy.
