Brocade Communications Systems,Inc. (Nasdaq-BRCD) Message Board

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Technology Stocks : Brocade Communications Systems,Inc. (Nasdaq-BRCD)

BRCD 12.73

0.0%

Nov 20 4:00 PM EST

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To: garrick le who wrote (179)	9/16/1999 10:19:00 PM
From: Kerry Lee	Read Replies (1) of 1583

<<This stock really puzzles me ... perhaps it is a trader 's stock and its small float makes its so volatile and unpredictable.>> Your statement is a good example why so many retail/day traders lose money. To execute a short position simply because a stock is overvalued is suicide. Consider the following: 1) In spite of obscene valuation, Wall St firms continue to initiate/reiterate BUY/Strong Buy ratings. Why? Because they are whores who want a piece of the underwriting pie and probable follow-on offering. Robbie Stevens and Cowen ( and others ) are clearly jockeying for a piece of a probable secondary.What the hell is Cowen doing calling BRCD a Strong BUY at north of $200 when BRCD's own IPO underwriter Morgan Stanley initiated coverage with a "Neutral" when BRCD was at $80? 2)Several people I have spoken to cannot find shares to borrow/short. What does that tell you about the effect of the small float and the underlying latent buying ( short covering )going forward? 3) BRCD is currently a "Wall Street "darling"/ hot stock and it is Mutual Fund Window Dressing time, ie a time when funds cut their dogs loose and take positions in successful stocks to show their investors what "winners" they had in their portfolio over the past quarter. I would not be surprised if fund buying continues at least thru the end of September . There are many good reasons for BRCD mgmt to do a follow-on offering soon: - good exit strategy for insiders/VC's to sell in an orderly fashion to funds ( minimize price drop ) who could not get in on the original IPO due to small float. Other companies such as PCLN and WEBT had secondaries with at least 50% of the shares being offered going to selling shareholders. - they can also raise more cash to buy other companies and minimize dilution at this high price range. I would not be surprised if they do a SPO at 4 million shares with 3 million share sold by insiders and 1 million new shares issued to raise another $200 million for the company coffers, presumably to buy other companies/technologies. There is no question that BRCD is WAY overvalued BUT that does not make it a good short ( yet ). It took a major slowdown in growth to bring the valuations of FORE and XYLN in line with the rest of the Datacomm market but at least for the next 1-2 quarters, Wall Street will conclude that the BRCD sales ramp is just starting and is at $100 million annual run rate ( conservative ). Look what Cisco paid for their latest acquisition. Don't fight the tape. You'll get burned.

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