Retta, at most you can have the size of the float approach the size of shares outstanding, which would be 105 millin shares or so.
The shares coming out onto the market, certainly had an impact. The shares have come from every source. Etrade earlier, Waterhouse filed, according to a recent news item insiders actually *sold* about a million shares.
The issue of insider sales has been discussed on this board a great deal - certainly one can't say insider sales are in and of themselves bad - there can be any number of legitimate reasons for it.
However, the timing could not have been worse: when there are serious questions being raised about the very foundations about NITE business (ECNs), and the price of NITE is already under tremendous pressure. I do keep in mind the fact that insiders are somewhat constrained as to when they can sell, but I must say - you could not have engineered a worse time to have massive insider sales, than recently. The market will draw conclusions, rightly or wrongly.
Trying to determine how much of the sell off in NITE relates to the ECN issues is tricky. Initially, my instinct was that the way to determine how ECNs are perceived as a danger to NITE was by watching institutional presence in NITE. The issue of ECNs after all is not a new one - this has been around for a long time, and their growth has been explosive for some time - they've been taking market share in trading for 2 years now. So, I assumed that institutions are well aware of it - and would not buy into NITE if they thought it was going the way of the dinosaurs. Retail investors are a different bunch - many of them don't become aware of issues until you have news releases. As a trader of course, I was always acutely aware of ECNs, but I must tell you, the analysts I've listened to, and the reports I've read did not impress me at all. When I was reading various reports, I'd be amazed that the issue of ECNs never came up. So, maybe these guys are really kind of clueless.
In the end, it doesn't matter what the exact reason has been. What matters is, how is NITE's business going to look in the future - because that should determine its price. My worry is that so much technical damage has been done the stock that it may never regain a truly high p/e. So, for those that had the misfortune to buy "high", the wait may be much longer than perhaps they bargained for. This kind of decline leaves deep scars in investor's psyches, and we'll pay the price of this for a long time. In some ways, NITE is in a no win situation - it suffers from all the downside risk perception of internet stocks, yet it doesn't have the same "ill-defined" dream potential of many nets. Look at CMGI - you can always say "hey, they could be incubating a net company that is going to change life as we know it, with untold riches for investors" - with such as story, investors have the option of "going for the gold", sky is the limit, sure, when times are bad, it will fall like crazy, because after all it is only "potential" - in bad times, investors retreat, but in good times - go to the MOON, the potential is "unlimited". Now look at NITE - in the best case, the business is very healthy, profitable etc. - but no "to the MOON" story. The fear is that when nets fall - NITE profit falls - so down the stock goes, as bad as the nets - but meanwhile there is less upside "story". Once the "story" of a stock is dead - forget about high p/e. That is my big fear - NITE being treated as just another finacial/brokerage stock w/ low p/e - strong earnings, but nobody cares. Some time ago I wrote a post here where I outlined all these issues while evaluating NITE as a long-term holding. Combine a threat to the "story" of NITE, with technical damage to the stock, and I say - get ready for a very, verrrrry, slow climb up.
You want story? You got JNPR - and the new IPO for which I've been waiting for a long time - and kept talking about on the MSFT board months ago - RHAT. I will make big $ in RHAT - as for NITE, I throw it in a drawer, forget it, and hope for the best.
Well, that's my take FWIW, and that's how I'll invest/trade.
Morgan |
