``A lot of adults sneak onto Homework Helper and use it for research purposes; I have many times,'' said Peter Krasilovsky, senior analyst at Arlen Communications in Bethesda, Md.
The Infonautics stock offering will be a major test of investor confidence in the future of fee-based online research in a market where free search services with names such as Yahoo!, Alta Vista and WebCrawler are numerous and heavily used.
It's not a sure thing ``in terms of being an Internet-related service company,'' said Ryan Jacob, director of research for the IPO Value Monitor in New York City. ``The question is: Will the value added [by the database] justify people paying a subscription?''
Krasilovsky agreed: ``If they can sell the concept of a monthly subscription service that provides critical information to both high school students and college students as well as just curious adults, I think they'll have a success.''
At an expected initial price of $14.50 per share, Infonautics would raise about $30 million in capital from a sale of 2.25 million shares of common stock.
The sale also could make millions for the company's small circle of existing stockholders, including founder and chairman Marvin I. Weinberger, whose nearly 1.8 million shares would grow in value by $19.6 million if the stock opens at $14.50. Weinberger, 41, will retain control over roughly 46 percent of the company.
Infonautics will trade on the Nasdaq stock market under the symbol INFO.
According to the prospectus, cash raised by the sale will pay for expansion and marketing of Homework Helper, available on the Prodigy and Microsoft Network online services, and the Electric Library, accessible via the World Wide Web (http://www.elibrary.com).
Infonautics also has begun marketing its underlying technology, which it is calling the Electronic Printing Press, to third parties.
By going public, Infonautics, which has 55 employees, will follow a parade of Internet-related firms into the stock market, where the much-hyped information superhighway has provided a fast lane to riches for some early investors.
This year, about 15 Internet startups are likely to go public. Infonautics' lead underwriter, Hambrecht & Quist in San Francisco, has underwritten at least a dozen Internet-related initial public offerings already.
Two of the hottest sellers in this speculative category have been Netscape Communications Corp. and Yahoo! Inc., both of which make software to help navigate the Internet. Netscape sold 5 million shares at $28 on Aug. 9, and Yahoo! sold 2.6 million shares at $13 on March 12. Netscape stock has soared and fallen. It closed Friday at $61.75 per share, down $2.75. Yahoo! hit $43 on its opening day. Friday, it closed at $31.75, up 50 cents.
But companies like these ``have created their own buzz about themselves,'' said Krasilovsky. ``I don't think there is a similar buzz for Infonautics,'' he said, because, until recently, ``Homework Helper has only been available on Prodigy, and most of the Web cognoscenti don't look at Prodigy.'' And even with the cash infusion, Infonautics' future is hardly assured, he said.
As a high-tech startup, Infonautics has yet to turn a profit, and is projecting losses for at least the next two years. The company posted $11.7 million in cumulative net losses for 1993 through 1995.
It had no revenues until last year, when subscriptions to Homework Helper netted $448,000, according to company figures. About 48 percent of those revenues went to pay royalties and license fees to content publishers and hardware and software vendors.
Because it started as a metered service before switching to a flat monthly rate of $9.95, and because the Prodigy online service, where it was introduced, has not grown like its America Online and CompuServe competitors, ``Homework Helper hasn't done as well as we might have expected,'' Krasilovsky said.
``The question I have'' is, he continued, ``if they start being successful, will the content providers continue to want to provide access to their content at the heavily discounted rates that they've been offering it?''