blankmind - and others... I have nothing against anyone disagreeing with me, and I think healthy discussion and disagreement, is very productive... one learns more by having one's ideas challenged, than if we only agreed w/ each other. I therefore welcome substantive criticizm. I do admit though, that I have little patience for personal attacks and abuse, that have nothing whatsoever to do with the issues at hand (btw, I never thought you were abusive). I think contrary opinions, as long as substantiated and cogently argued, should be welcomed on this board, as that benefits everyone - bull and bear.
<<Knight's volume rose 12.5 percent in December, higher than the industry's 8.3 percent growth, though lower than online firms' 19.5 percent gain
i'm dense (please do not rub it in morgan), but why should we expect nite to capture all the olb growth when we know a certain focus has been on attracting and doing well in the institutional area?>>
blankmind - the majority of NITE's business, the vast majority, is retail trade. True, there is focus on growing institutional business, which is far more profitable. But that does not mean that the institutional business ought to come at the EXPENSE of retail growth, but rather in ADDITION to it. Retail is NITE's bread and butter. In that sense, your statement <<why should we expect nite to capture all the olb growth>> has a self-evident answer, business is business. Just because the profit margin on a Jaguar might be higher, and GM (or is it Ford that owns it?!) might want to grow their sales of Jaguar, doesn't meant that they should feel good about not capturing all the possible sales in their ordinary lower-margin bread and butter sedans. Incidentally, that statistic you just quoted is NOT good. Frankly, I AM disappointed that NITE's volume growth has lagged OLB's volume growth - I would like to see NITE LEAD OLBs in volume growth, and every other metric.
<<i do not care if they did receive their shares for pennies, don't you think mgmt, which wants to sell, would like to sell at the highest possible price?>>
Sure they'd like to sell shares at the highest possible price. But what if they actually don't believe NITE is worth more than $22-$35, and they don't believe they can drive the price higher through managing it? They'd sell it for what looks like a good, actually rich price of $45.
As to the $22-$35 collar, I've argued till I'm blue in the face - it seems obvious to me that this is what NITE/Arbitrage managements best guess was as to a sensible price level for early Y2K. Note that they didn't set it at 45-65. Why? The 22-35 is not some arbitrary low, meaningless price range. If tomorrow MSFT decided to acquire another company in a stock deal, do you think they'd set an absurdly low meaningless price range? Would you see them set it at, say $3-$12? Nope. They'd set what they thought was a real range of POSSIBLE scenarios.
<<if kp "told us" in 99 that the stock was worth between 22-35, why do you blame kp for those peop who blindly pushed nite to 45+?>>
Well, do YOU think NITE is worth somewhere between $22-$35? Clearly, almost no NITE investor thinks that. And further, by releasing this information, KP didn't "tell" most investors - look at the disbelief that greeted my posts when I argued that this is a scary view of NITE's valuation by management. Apparently, the only "investors" he got through to, were shorters. I never blamed KP for "pushing" the price of NITE to $45 - I blamed him for the opposite. I blamed him for never making the effort to have NITE reflect anything but the lowest of p/es. I mean, my God, there are institutions, serious institutions that actually think that NITE ought to have a p/e of no more than a shabby financial institution:
<<Our Unattractive rating, and 12-month price objective of less than $20 per share, is based on three valuation benchmarks: 1) discounted cash flow, 2) price earnings; and 3) price to book. While we recognize that Knight prefers to view itself as an Internet company ? which would warrant the use of Internet valuation techniques ? we consider the firm a financial institution, albeit one that employs technology to create economies of scale and a competitive advantage, and that benefits from the current positive trends in the online equity transaction market.
***DCF Yields A $14 FAIR VALUE. Our discounted cash flow analysis yields a fair value of $14 per share ? and a 12-month price objective of less than $20 per share. Within our model, we assume a 15% five-year earnings growth rate and a cost of equity capital of 17%-plus. Our slower-than-consensus earnings growth rate (15% versus 25%) is based on our view that the impact of new competition will take a bigger toll than most observers currently anticipate, and that new ventures (e.g., option trading and Japanese trading) may take longer to develop.
***BACK TO THE BASICS. Owing to our view that Knight?s ultimate success is tied to the capital markets and that the firm takes capital risk in order to make money, we return to the tried and true method of brokerage valuation ? price to book and price to forward earnings multiples. Using historical averages for the stocks of other capital-markets-focused firms, we think NITE shares deserve to trade near $11.50 to $15.50 per share ? or 2x our estimated 2000 year-end book value of $5.78 and 10x our 2000 estimated EPS of $1.55 per share.>>
BTW, here's the full BS report (courtesy of a poster on RB, jgoldstein54, who apparently got it from yahoo):
ragingbull.com
Read and weep. "NITE deserves to trade between $11.5 - $15.5 per share". I'm sick of it. I'm sick of the incompetence, intellectual laziness, and conflicts of interest that is the stock in trade of so many analysts. I'm sick of the callous actions of management which doesn't acknowledge mistakes, that arrogantly thinks they "know it all" and refuses to LEARN what the market tries to teach them (importance of PR, etc., etc., etc. ad nauseum) - you'd think that when they see the value of your shares cut by 75% over and over again, they'd get a clue that perhaps their strategies of "no comment" and "above it all" are NOT working. I'm sick of the fact that management's stake in the shareprice appears so disconnected from the experience of the common shareholder. I'm sick of the brutal attitude management displays toward shareholders, as if just building a great business is enough - hey, if it doesn't translate into REWARDS for the common shareholder (and rewards are counted here in share price), then you are NOT doing your job. I'm sick of them treating NITE stock as a quick, cheap and dirty way of enriching themselves, the common shareholder be damned. And I am profoundly saddened that so many shareholders are willing to accept a 75% decline in shareprice (with more of a decline promised by BS - who think another 50-70% decline from today's low price is warranted) - willing to accept it, and defending management all the way, all the time, at all costs, and management is God-like and can do no wrong. If you don't recognize that such a dramatic decline in shareprice, over such a long period of time (at this point, NITE has spent more time declining than rising, since its IPO), must be at least partially laid at the feet of management failure, then truly there is no hope. This is like a woman saying about a rapist "he was just making love". I really despair of such attitudes. I have done as much as I could to fight for shareholder value, I have tried to point out the missteps and the horrendous MISmanagement of shareholder value - but it clearly looks like I am in a tiny minority. If they like it, I can't do anything about it.
I've argued my case as well as I could. I realize that many have all sorts of objections to my arguments, but truth be told, it seems like we are begining to go in circles - I've answered the various rebuttals, but clearly I am not communicating well, and I take responsibility for that... but I can't do better.
I made my arguments - at this point, any further misunderstanding is my fault. I don't want to repeat myself. Accordingly, I will soon take another break from posting here. I've bored everyone long enough. Unfortunately, I feel I have been cast in the role of a critic, simply because I don't see these concerns being voiced here. In reality, I am not a NITE bear - I'm a long-term NITE bull, but not a blind one, and I think it important to look at a stock, company and management with a cold eye, and point out the bad as well as the good. I have *tried* to be as fair as possible, and I hope I've made some kind of contribution.
Good luck to all NITE shareholders!
Morgan |
