What's the M stand for? I've been using the P2P buzzword at parties.
Profit to Profit!
Btw
Could you believe this could happen to a San Diego company?
August 18, 2000
Hit by a sharp decline in their stock, officials of San Diego's Titan Corp. yesterday tried to quash a spate of Internet-borne rumors that the company is rife with accounting problems.
The rumors -- said to have been generated by a San Francisco hedge fund with a vested interest in driving the stock price down -- cut deep into the company's market value this week. Since Monday, Titan stock has lost a quarter of its value, plummeting from $31.121/2 to $23.25.
In a hastily convened teleconference, Titan's leading officers assured investors, reporters and Wall Street analysts that the gossip was unfounded. Eric DeMarco, chief financial officer, said "it is just not the case" that the company inflated its revenue figures or subsidized sales to subsidiaries.
Analysts yesterday echoed the company, blaming the rumors on a short-selling hedge fund hoping to drive the stock price down in order to make a profit on the decline. Short-sellers are traders who borrow shares of a stock to sell on the gamble that the borrowed shares can later be replaced at a lower price.
"There is no legitimate reason for the drubbing that the stock has gotten," said Mark Jordan with the St. Louis office of the A.G. Edwards investment firm, which has helped Titan finance some of its merger-and-acquisition deals.
The attacks took place after Titan filed an S-1 form with the Securities and Exchange Commission, clearing the way for the spinoff of its SureBeam food-purification unit.
"Short-sellers know that companies are constrained from what they can say after an S-1 is filed," said Michael Crawford, analyst with B. Riley & Co. in Los Angeles.
Because SEC rules limit what corporate officials can say during an initial stock offering, "the short-sellers are free to make allegations, but the company can't respond," Crawford said.
One example of the Web-based criticisms was a charge that Titan had improperly added $10 million to its balance sheet to reflect a deal under which it would provide SureBeam technology to Texas A&M University.
Titan's anonymous critics questioned the cash value assigned to the deal, noting that it was a swap transaction, with no cash involved. They suggested the company could find itself in hot water for overvaluing the deal.
Because of the "quiet period" imposed by the SEC, Titan officials could not respond in detail, instead inviting listeners to read the S-1 statement, which described the deal.
Wall Street analysts were not so constrained. Crawford said the A&M deal gave Titan a 10-year lease on a research and development facility, as well as access to cold storage facilities and research data from A&M's agricultural and food-safety programs.
"To say that Titan was pumping up the value of those assets doesn't make sense," Crawford said.
Titan's teleconference seemed to allay investor concerns -- even on the Web. The Yahoo! stock investment chatboard yesterday was filled with investors breathing a sigh of relief about the value of their Titan holdings.
Some investors compared Titan's situation to the Tyco incident. Tyco's shares fell sharply after a short-seller spread rumors that its accounting practices were awry.
"Tyco dropped in half, but when all the SEC and auditors finished, the stock doubled and is near a new high," a Titan investor from Milwaukee noted. "My sense is this is similar and in time the facts will prevail. But it is painful while we wait."
Titan is traded on the New York Stock Exchange as TTN. |
