MAWI mentioned on MARKETWATCH CBS inside
Thom Calandra's StockWatch
Net incubators seek potent holdings
By Thom Calandra, CBS MarketWatch
Last Update: 10:31 AM ET Dec 22, 1999 More StockWatch
Commentary
SAN FRANCISCO (CBS.MW) -- Investors are lighting up Internet bulletin boards, searching for venture capital arms of publicly traded companies.
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12/22/99 10:09:08 AM ET
The thinking goes: buy one Internet stock and you're dependent on one business, one set of managers, one balance sheet. And so on. Buy a venture capital unit, and you get to own dozens of these companies.
We explored this theme earlier in the week, identifying several Internet incubators that have little recognition against the likes of CMGI (market cap: $33 billion), Japan's Softbank ($90 billion) or Internet Capital Group ($50 billion). See the original report. Indeed, after the hefty stock gains of these three Internet incubator leaders, investors are pushing the stocks of their smaller counterparts higher.
Companies with names such as London Pacific Group, Harris & Harris Group, Frontline Capital Group, Winfield Capital and Point West Capital have (mostly) seen their shares gain sharply in recent days. Those are some of the names we tagged earlier in the week. Some of the smallest of these companies, like tiny Point West Capital (PWCC: news, msgs) in San Francisco and Harris & Harris in New York (HHGP: news, msgs), have seen shares more than double in several days, thanks to the fervor surrounding Internet venture-capital companies.
Point West's market cap (see stock chart) is about $45 million; Harris & Harris sports a $136 million market cap. Nearly all of these companies, with the exception of London Pacific, trade on Nasdaq. London Pacific Group (LDP: news, msgs), an asset management company and insurer, recently moved its American Depositary Receipts to the New York Stock Exchange from Nasdaq.
George Nichols, an Internet stock analyst at advisory firm Morningstar, tells me stock markets in Japan, Germany, Hong Kong, Canada and the United States are filled with Internet venture groups.
But we'll focus for now on publicly traded ones in the United States. Practically all of them, by the way, have Fund, Group or Capital in their names.
"There's quasi-Net VC stock VirtualFund.com (VFND: news, msgs), the least appealing of all as far as I'm concerned. Also, THCG (THCG: news, msgs) has a stake in Interleaf (LEAF: news, msgs) and webMethods, a private company I've followed closely for months, which I predict will be one of the most successful IPOs next year," Nichols says.
Interleaf's e-content division helps companies find ways to transmit data and software applications via wireless methods, the Internet and through XML technology. Interleaf shares have risen to 40 or so from under 1 in a year. THCG owns stakes in several private companies, including iBeauty.com and RealTimeImage Inc.
VirtualFund.com sports a market cap of $50 million. THCG's market cap is $160 million. (See THCG stock chart.)
Nichols, who was an early investor in Softbank, also mentioned Big Flower Holdings (BGF: news, msgs), whose market cap is $616 million.
Another relatively unknown Internet incubator, according to several investors I spoke with this week, is Rare Medium Group (RRRR: news, msgs). The company has a unit called Rare Ventures. The New York City company, which has a consulting arm for Fortune 1000 companies, says it employs 600 Internet professionals around the United States. Market cap is $1.5 billion. Rare Medium says it has funded 16 Internet-related companies and counts Apollo Management and Bear-Stearns as investors.
The Nasdaq bulletin boards are also filled with so-called incubators. One of them, M&A West (MAWI: news, msgs), says revenues for the most recent quarter rose more than 800 percent from a year ago to $2.1 million. A spokesman for the Silicon Valley company, Rick West, says he expects the tiny company to gain approval for a full Nasdaq listing in January or February.
Recent investments include stakes in venture capital portal VentureList.com and online grocery provider VirtualGroceries.com.
"MAWI has its hands in so many different ventures that it's a bit overwhelming," West tells me.
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