Roger and all,
Take a look at USWB (one of the many internet stocks that
have hit the IPO market - I wonder how long it will take
before the supply of the internet paper to exceed
the demand).
USWB has around 34M outstanding shares and around 12M
options. The float is 5.75 million shares with the
remainder of the outstanding shares in a lockup period.
At $19-20, this company is valued at almost 1 billion.
IMHO, USWB is way overvalued
USWB is in the business of (in its words)
providing Intranet, Extranet and Web site solutions
and services to medium-sized and large companies.
(in my words) making web pages.
It is on a big acquisition spree - taking over 20+
small webshops to build a country wide network.
It has filed a S-4 to register 16,666,667 shares of its
Common Stock for use in future acquisitions. Serious
dilution is on the way.
Its latest quarterly earnings report
biz.yahoo.com
claims a sequential quarterly revenue increase of 85%.
However, on a pro forma basis (IMHO, this is more
relevant), it is showing an increase of only 16%.
IMHO, this growth rate is very low and does not
justify even half of USWB's market cap.
The company is bleeding money - it will not earn
money for quite some time.
It claims to have an impressive list of clients
- however this list includes any company which has
yielded revenue of more than just 50k. Its 30 largest
clients spent from 100k to 400k each - this leads me
to believe that this company is nothing more than
a body-shop specializing in personnel with webpage
creation experience (the internet connection causing
a ridiculous market valuation).
From my experience, any respectably sized company
has an in-house team to create and maintain webpages.
This sector has extremely low barriers of entry
- high-school kids can compete too.
Its SEC filings are a blatant use of name-dropping.
It claims of having strategic business relationships
with Intel, SUN, Microsoft, HWP, Reuters, etc.
On closer evaluation
Microsoft - It is a Microsoft certified solution
provider (there are hundreds of them).
Sun - authorized reseller of the Sun Netra range
of products.
Most of these "strategic relationships" is nothing
more than being one of the certified educational
program providers. IMHO, none of these relationships
will ever provide serious revenue sources.
The Intel relationship has (unlike the others) some
financial backing (Intel bought 10M worth of shares
at $6 each).
I have initiated a short position at $19.75.
Comments ?
Regards
Rajiv |
