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The thunderous reception Friday for the initial public offering of Emerge Interactive, which aims to bring e-commerce to the cattle industry, provides a prime example of the current mania for business-to-business (B2B) Internet plays.

Emerge, which sold eight million shares at $15 late Thursday, finished Friday at 47 1/4, valuing the company at $1.6 billion. The Emerge Interactive IPO represents the latest chapter in a corporate chronicle that was outlined last month in a skeptical article on Internet Capital Group, the highflying B2B investment company that holds a 25% stake in Emerge.

Emerge, unsuccessful in other corporate pursuits, last year bought three cattle-oriented Websites, including Cyberstockyard.com, for around $5 million. Then in November, Internet Capital, the leading B2B incubator with stakes in some four dozen companies, paid $50 million for a 30% stake in Emerge, valuing the company at $166 million. Emerge then filed for an IPO in December, valuing itself at around $400 million. Now, the company is worth four times that much.

Emerge Interactive, of course, is unprofitable and expects to remain in the red for the foreseeable future. The company's fans say it has "first-mover" advantage in the cattle "space," a large market given that 30 million animals change hands annually. Emerge wants to become an eBay-like intermediary for cattle sales over the Internet.

Yet Mike Miller, an analyst with CattleFax in Denver, says Emerge faces some challenges because cattle historically have been auctioned at barnyard sales. "I can't argue with their idea, but this is an industry grounded in tradition. People in this industry are very comfortable with the way business has been done."

Emerge has had some success; its cattle trading volume was $17 million in the first nine months of 1999. But Emerge's gross profit was less than $200,000, before expenses.

Let's recap the Emerge story: Its $5 million investment a year ago is now worth more than 300 times that amount. Internet Capital Group, meanwhile, scored a coup because its $50 million investment turned into $400 million in just three months. It's no wonder that venture capitalists and corporations ranging from Intel to Oracle to General Electric are plowing money into Internet companies.

A far cheaper alternative for investors attracted to the cattle business is IBP, the nation's largest meatpacker, whose shares have slid 40% in the past few months, to 15. IBP, which is involved in a grisly, laborintensive business-it employs 45,000trades for just five times earnings. Its market value of $1.4 billion is less than that of Emerge Interactive. One IBP fan labels it a "protein play" because it should benefit from higher beef consumption and the current popularity of the Atkins diet.

The contrast between the booming, profitless Emerge and the depressed, profitable IBP says a lot about investor preferences in today's market.

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Barrons has been bearish for years. I stopped reading that paper because they have predicted 10 of the last 2 down markets. They really would prefer that you invest in a meat packer rather than technology, biotech and BtoB!!
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