be wary of people crowing about the fundamentals without mentioning specific numbers. they likely havent thought things through and are just echoing the companies statements.
while business is good and may continue to be good, the problem lies in the ballooning shares outstanding which have risen faster than the companies ability to generate earnings.
the numbers:
1999 eps est: .46
2000 eps est: .73
lets say 2001: 1.00
using the 85 million fully diluted shares out for this quarter, lets apply the following multiples in 2001:
@20pe = 85 million earned and market cap of 1.7 billion
@30pe = 85 million earned and market cap of 2.55 billion
@40pe = 85 million earned and market cap of 3.4 billion
under the most optimistic scenario, you double your money in 2 years 100% gain. under the least optimistic, you make no gains. under the average scenario you make 65%.
this all assumes no excessively dilutive acquisitions between now and then.
the closer i look, the less favorable the risk/reward looks to me. my projection is a continuation of the trend - insiders and acquirees getting rich at the expense of shareholders. the wealth that usweb has created since IPO is impressive, but its clear that it is not being transferred to the average shareholder.
in order to understand this most clearly, one only need to look at co*founder Firmages actions since IPO. in responding to criticisms about the secondary offering and insider selling early on, he suggested that it was just taking some profits for hard work. but his and others selling has continued unabated. the true*believers shrug it off as normal, bla, bla, he needs to fund his startup. i say bullshit - he knows the gettin is good and he is selling out.
the story is a simple one: insiders selling and getting rich, acquirees selling out high to uswb and getting rich, the non insider shareholders left holding a risky and overvalued stock in a company that is not being run for their benefit.
So what about Shaw ? Outstanding CEO who was dealt a difficult hand. He inherýted most of the acquisitions and options, so he could very well manage a successful business at usweb wýthout it ever benefýtting the average shareholder - bummer.
The other problem with this scenario is that it limits his flexibility in being generous with options to attract more talent. other companies without the problem of excessive shares outstanding can compensate more generously with stock options - competitive disadvantage in recruiting.
Sorry true believers - it just doesnt look very favorable, unless you are an insider or acquiree selling to the public.
rick.
possible strategy: sell on announcement of strategic alliance. to me that looks like the best exit opportunity.
love this guy, Shaw, but hes got a huge challenge overcoming 85 million shares outstanding.
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