Venturing out on a limb
Insiders bargain-hunt languishing shares
By Thom Calandra, CBS MarketWatch
Last Update: 12:33 PM ET Nov. 20, 2001
SAN FRANCISCO (CBS.MW) -- Insiders who are also venture capitalists are buying stock in some of their portfolio companies.
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It's not happening frequently enough to qualify as a trend. But in recent months, several battered technology companies have become large purchases for directors whose day jobs are in the business of private equity.
Venture capitalists are supposed to be some of the best bargain-basement buyers in the business. They live by their instincts and the investments they make. Of late, alas, many of their private and public holdings have been crushed in terms of valuations.
Still, insiders such as those who sit on a company's board of directors are supposed to know their own companies better than anyone. This time around in the stock market, directors who are also venture professionals may be getting shares as cheap as when they bought into these technology companies at the private, start-up stage.
C. Richard Kramlich at New Enterprise Associates, a long-established venture firm, bought 2 million shares of Juniper Networks (JNPR: news, chart, profile) at about $11 a share earlier this autumn, according to Thomson Financial/Lancer Analytics. Two months later, and Juniper's Nasdaq stock has more than doubled.
Kramlich, a co-founder of New Enterprise, has been in the venture business a long time, and he may just be benefiting from Nasdaq's autumn rally. Still, 2 million shares of anything is a big bet. Juniper, whose products go into the building of Internet protocol networks, sells for $26 a share these days.
"Overall, tech buying by insiders increased slightly in October, but still remains quite low compared to last year," says Lon Gerber, director of Thomson Financial/Lancer Analytics. Gerber, who tracks insiders with a successful history of making money on their trades, says it's hard to detect a venture capitalist trend thus far. ( See figures in latest insider column.)
Still, insider activity figures compiled by Gerber show several venture professionals prowling for cheap stocks.
Ray Lane, a former Oracle top lieutenant who became a partner at venture capital firm Kleiner Perkins Caufield & Byers, bought 3 million or so shares of enterprise software company SeeBeyond Technologies (SBYN: news, chart, profile) at $1.40 a share. The company's Nasdaq stock now sells for $6.50 a shot.
Jeffrey M. Drazan, a general partner at Sierra Ventures, is listed as a buyer of 19.36 million shares of Vina Technologies (VINA: news, chart, profile) shares at 81 cents a ping. The stock now sells for north of a buck. Vina just completed a huge private placement of shares and warrants to existing shareholders and insiders.
Vina Technologies is another one of those broadband supplier companies that have had a rough hoe in the past year but seem to be heating up again. One publicly traded venture firm, London Pacific Group (LDP: news, chart, profile), owns about 3 million shares of Vina.
Venture capitalists are not always the best indicator for a bargain stock. Steven T. Jurvetson of venture firm Draper Jurvetson Fisher bought shares of Kana Software (KANA: news, chart, profile) in February at $3.25 or so a share. The stock sells for less than half that now.
It's not just venture capitalists who bear watching.
Investment bankers are pretty good benchmarks. In the area of broadband Internet companies, Sandy R. Robertson, a wise figure in investment banking and venture capital circles, sits on the board of Netro Corp. (NTRO: news, chart, profile) in California.
Robertson hasn't bought shares in Netro since February, but he's worth watching. A large Netro shareholder, C. Robert Coates, wants Netro to use cash reserves to buy back the company's languishing shares.
More broadly, Gerber at Lancer Analytics said executives acquired health-care and food company shares in October. These included U.S. Oncology (USON: news, chart, profile), Pharmaceutical Product Development (PPDI: news, chart, profile), Tenet Healthcare Corp.
(THC: news, chart, profile), Winn-Dixie Stores Inc. (WIN: news, chart, profile), Great Atlantic & Pacific Tea Co. (GAP: news, chart, profile) and Outback Steakhouse (OSI: news, chart, profile).
Thom Calandra is Editor-in-Chief of CBS MarketWatch. |
