Creative Host Soared After Striking Chord With Big Band Leader
San Diego, June 20 (Bloomberg) -- Creative Host Services
Inc., a fast-food concession operator at airports, went public in
1997 and for two years never traded above 4 3/4.
Then the San Diego company's stock took off. For no obvious
reason, shares rose from less than $1 last November to a high of
29 recently on the Nasdaq Small-Cap market.
Much of the activity in Creative Host's shares came from a
single source: John Stewart Jackson, a wealthy 63-year-old Denver
businessman, bought 42 percent -- and effective control -- of the
company over the past half year.
``This company has a captive audience in airports,'' said
Jackson, a saxophonist and the owner-leader of the Woody Herman
orchestra. ``I was very impressed.''
Jackson was drawn to Creative Host after listening to a stock
market radio call-in show hosted by Steven Muth, a 40-year-old
Denver broker. Muth ``believed'' in Creative Host and promoted its
shares vigorously, says Sayed Ali, the company's president.
Muth was so avid about Creative Host that his brokerage, a
Mutual of Omaha unit called Kirkpatrick, Pettis, Smith Polian
Inc., became its largest market maker. Though the firm's research
analysts didn't even cover Creative Host, the brokerage followed
Muth's lead and began making a market in the shares.
Why the Buzz?
What sparked Muth's belief in Creative Host? It couldn't have
been its earnings figures: The company lost $579,758 last year, a
reversal from the year-earlier profit of $480,532.
Muth declined to comment about his dealings on behalf of
Creative Host or any aspect of his career or business activity.
Jackson soon became an enthusiast, buying Creative Host
shares through Muth and directly from the company. Others are
still mystified by the sudden excitement.
``I have absolutely no explanation for why the price got up
so high,'' said Jim Creamer, research director for EBI Securities,
Creative Host's underwriter.
Much of the buzz about the company's stock can be traced to
Muth and his Denver business associate, David Olson, who is
Creative Host's outside investor-relations counsel. (The two are
partners in Mile High Foliage, a Colorado tree farm.)
Muth and Olson were brokers at Cohig & Associates in 1997,
which was EBI Securities' name the year the Denver-based
underwriter took Creative Host public. Two months before the IPO,
Olson, 40, was permitted to resign, according to regulatory files,
which showed he'd come under investigation following a customer's
complaint.
Last year, Olson was censured, fined $10,000 and suspended
for 30 days by the National Association of Securities Dealers for
making ``a material misrepresentation'' to a public customer.
Olson, who no longer is a broker, declined to be interviewed.
Happy Owner
Muth, also 40, worked at Cohig from 1993 to 1998. Earlier at
another brokerage, he was censured, fined $2,500 and suspended for
ten days by the NASD, which found he had ``aided and abetted a
scheme to manipulate the market price of a stock'' and overcharged
clients for stocks in 48 trades.
Jackson said he wasn't aware of Muth's disciplinary record
but isn't troubled by it. ``I can see how somebody could have some
problems,'' he said. ``All I know is his reputation speaks for
itself.''
Ali says he met Jackson through Olson. Soon, Ali and Muth
were dining with Jackson at Cliff Young's, a Denver restaurant
owned by the orchestra leader. Jackson today owns more than double
the 1 million shares Ali holds in Creative Host.
For his work on behalf of Creative Host, Olson received stock
and warrants now worth more than $3 million.
Jackson bought rights to the Woody Herman name in 1991 and
tours with the 15-member orchestra in the U.S. and abroad. Reached
in Wales on a recent U.K. tour, Jackson said the band gave more
than 125 performances last year.
`I'm a Buyer'
Jackson, who said he now owns 2.4 million shares, seemed
surprised to learn that this represents 42 percent of the company,
saying he's still buying and unconcerned that the shares might
fall from their recent relatively high price.
``I'm a buyer, not a seller,'' he said. ``I'm here for the
long run. I think the company has a wonderful future.''
While Creative Host still trade near its high, enthusiasm has
waned at Kirkpatrick Pettis, which stopped making a market in the
stock about three weeks ago.
Demand for the stock had fallen, said Owen Sadler,
Kirkpatrick's head trader. The stock fell 1 1/4 yesterday to 24
3/8 on volume of 70,100 shares.
On its part, Creative Host is trying to sell up to 150,000
shares at $7 through a private placement, the second time in three
months the company is selling stock at a below-market price. In
March, it sold 260,700 restricted shares at 5, a discount of at
least 44 percent to its then market price.
``It's a young stock,'' says Ali. ``It hasn't been traded
long enough for there to be a comfort zone'' for investors.
-- David Evans in the New York newsroom (212) 318-2300/fk
Story illustration: CHST US <Equity> GPC D to graph the recent
performance of Creative Host shares. Type MMKR KPSP, and tab in to
change the beginning date to 6/99 and the sort by to ``T'' to see
how Kirkpatrick's market making in Creative Host compared to other
stocks. |
