MemberWorks Shares Soar After Private Analysts' Call
Stamford, Connecticut, Jan. 30 (Bloomberg) -- MemberWorks Inc. shares soared 24 percent after the provider of customer- incentive programs for retailers and banks told analysts and investors the company would generate more cash flow during the next two quarters than expected, an analyst said.
MemberWorks executives told the 44 analysts and investors on an invitation-only conference call that that cash flow for the next six months would be ``significantly higher than estimates,'' said analyst Matthew Davies of J.P. Morgan. Davies rates the stock a ``long-term buy.''
Shares of the Stamford, Connecticut-based company, which traded at $20.06 as the call began, soared as high as $25. For the day, MemberWorks shares rose $4.69 to close at $24.63.
By excluding many investors, the conference call may violate Regulation FD, the rule the Securities and Exchange Commission adopted in October to prevent selective disclosure of important information about companies.
``The call has historically been invitation-only,'' Chief Financial Officer James Duffy said in an interview. ``The Webcast was supposed to be live. We had technical problems.'' A replay of the call is now available at the company's Web site, www.memberworks.com.
A reporter, initially permitted to join the call by telephone, was ejected after two minutes. The conference call attendant said an invitation was required to participate.
"When they pick and choose who gets on, and then hide behind a technical glitch while throwing non-invited listeners off, that sounds as if it is a violation of the rule," said Washington attorney Harvey Pitt, former general counsel of the Securities and Exchange Commission.
Rule FD
Rule FD bars companies from releasing important information to favored stock analysts before disclosing it to the public. The rule, which went into effect Oct. 23, was championed by departing SEC Chairman Arthur Levitt, who said it would level the playing field between corporate insiders and individual investors.
``If this conference call was deliberately limited to 44 individuals, I doubt that can qualify as a broad and non- exclusionary distribution to the public, as required by Regulation FD,'' said John Coffee, professor of securities law at Columbia University.
The company said it lost $7.3 million, or 48 cents a share in the quarter ended Dec. 31, compared to a profit of $3 million, or 18 cents a share in the year-earlier period. Revenue increased 49 percent to $117.6 million.
MemberWorks had a negative net worth of $11.8 million on Dec. 31. Current liabilities of $382 million exceeded current assets of $243.7 million, leaving the company with negative working capital of $138.3 million.
At its recent price of $25, the company's 15.3 million shares are valued at more than $380 million.
Jan/30/2001 17:45 ET
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