As they say, "Buy when blood is running in the streets." Unless, of course, you happen to know the market will drop tomorrow also. The market declines of this week are healthy, having blown the foam off the top of the brew.
My take is that NITE's drop is a confluence of events:
1. Lockup expiration - some insiders may have sold (they filed Form 144's).
2. Fear of Lockup expiration-related selling.
3. Price erosion has triggered margin calls. Subsequent margin call-related selling has caused further declines, which, in turn, trigger further margin calls.
4. Traders who expected short-term gains on NITE's excellent earnings report are disappointed and are taking their money out.
5. Perception that SCH,DLJ,Spear's ECN deal is going to matter to NITE. Though ECN's do present some threat to MM's, it will take a while before there is a critical mass of ECN activity to generate enough spontaneous liquidity to compete with the market making capability of NITE. By then, who knows what NITE will be into. Certainly, they'll be sharing order flow with ECN's and will have some profitable partnerships.
When the above factors, most of which I view as transient, do pass (and they will), NITE will experience some amazing buoyancy.
From the Conference Call, it is obvious Pasternak is concerned about shareholder value (especially if he wants to make an acquisition, he'll use shares). He did say that he's frustrated that the market doesn't accord NITE a PE comparable to that of SCH.
Because of Paternak's comment about being "frustrated with NITE's PE", I think we can expect NITE to take some defensive measures in the next few days, e.g. accelerate the announcement of a positive development, etc.
Morgan, did you listen to the Conference Call? I don't get the impression you did, though I missed a few posts. If you haven't, it's worth spending an hour. |
