wit capital (witc)
disclaimer: i have 300 $25 witc options contracts due april 21, i.e. i am HEAVILY biased toward getting people into this stock! :>
background
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to provide a quick flavor of what witc is about, i'll quote today's (march 29th 2000) WALL STREET JOURNAL INTERACTIVE EDITION: "Wit Capital , which is based in New York and owned in part by Goldman Sachs Group, handles more IPOs than any other online investment bank. It has been involved in 36 IPOs so far this year, according to Thomson Financial Securities Data. Its closest competitor, E*Offering, which is 28% owned by E*Trade Group, has been involved in 25."
[i've been watching wit since i first heard about them in 95, and there's a lot more to them than the above suggests. they have their problems (the above quote is part of an article discussing an IPO screw-up) but i see them as being every bit as well poised for growth in the next few years as cmgi was back in the day.]
value
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i believe that there is an unusually large disconnect between witc's current stock price and their near term financial performance, due to be formally reported during the week starting april 17th, as well as their long term outlook.
their current stock price is $17.75, about five bucks up from their IPO last summer. their market cap is about $1.3b.
their financial performance shows a clear trend that belies their valuation. they had $2m revenue, ($10m) loss in 98, $50m/($20m) in 99, and a recently (3/23) pre-announced $85m+ in this first Q, with some unspecified profit.
how much profit?
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the last point about unspecified profit is one reason that i think witc is particularly interesting right now.
to me, it seems reasonable to expect that most of witc's excess revenue over estimates for q1 ($30m - $40m) boils down to gains in the number of shares that issuers are paying witc for their investment bank services, and the post-IPO performance of those shares. (does anyone have good reason to think otherwise?)
such gains would have almost zero associated expense.
think about that.
if this is so, and assuming no other major surprises, then $15m would arguably be a conservative estimate of witc's q1 profit.
recent profit estimate adjustments by analysts in response to witc's 3/23 announcement do not seem to take the same view as i do, to say the least -- their adjustments were tiny. but analysts have been hugely underestimating witc's performance for several Q's now anyway, so i just think they don't understand the company.
the real story is long term
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while my musings about profit lead me to wonder if there will be a run up in the next 3 weeks, the real story is long term.
wit capital is probably the world's foremost innovator in developing new ways to make investment capital available to new ventures. think about that...
one final tidbit
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witc's ceo, who is on the board of several major companies, bought $1m worth of witc shares at $13 - $15 on 2/17. iyam, that is an impressive insider purchase. |
