Our community is being sold! (from Briefing).
go2net INC (GNET) 27 1/2 +7/8. GNET shares jumped to $30.75 a share in early trading on news the company reached a
deal to acquire online chat community Silicon Investor. According to GNET, the acquisition will increase advertising,
subscription and commerce opportunities for go2net, as well as nearly triple the company's current total page views per month
and significantly increase its overall reach. Also released this morning was the company's 1st qtr earnings report. For the
period, GNET logged revenues of $609,143. Net loss from operations widened to $636,229 from $414,128. Based on
revenues reported for the past 12-months, GNET trades at 104 times sales (which does not account for the 1.125 million
shares the company will issue to acquire Silicon Investor). Silicon Investors' financials were not included in the press
release, so it is not clear how much the deal will immediately add to GNET's top-line. As with most Internet stocks, GNET is
probably overvalued at its current level. However, this company is making the type of strategic acquisitions that is allowing it to
slowly move up from the bottom of the Internet heap. Moreover, the company is only one year old. While it would probably
not be wise to be acquiring GNET shares at this level as a long-term play, this company is worth keeping an eye on over the
next year, as it becomes clearer whether the growth-through-acquisition strategy is actually working effectively for go2net .
Currently, the company's properties include: MetaCrawler, a search/index guide; PlaySite, a Java- based multiplayer online
games network; and StockSite, which offers articles, portfolio tracking tools, company research and news relating to business
and finance. The one thing that continues to worry us about GNET is the way this IPO got done. The company was taken
public by Maxwell Capital in April 1997. At the time, Maxwell Capital had been operating as a broker-dealer for less than one
year and had never participated in a public offering as an underwriter. What's more, Russell C. Horowitz, President and CEO
of go2net, is the brother of David M. Horowitz, the President/CEO and controlling stockholder of Maxwell Capital. |
