Reqd. Reading: From a DGIV'r who sent me this summary, Thanks, Eric.
"I may be wrong, but I believe the float of Iomega shares was scooped up by the AOL and Internet audiences of the Motley Fool before the stock price exploded and went through successive splits, and the MF portfolio philosophy is "hold until fundamentals change."
The MF successfully used online media to "beat Wall Street" to the IOMG shares, i.e.
(sub-DGIV)and SI for MF
Wall Street was "late to the Iomega party" and failed to obtain cheap
shares...possibly a first time example of the "power of the 'net."
Stock Split 12/23/97 2 for 1
Stock Split 05/21/96 2 for 1
Stock Split 02/01/96 3 for 1
(DGIV splits TBA)
(since there are presently(IOM) 261,765,000 outstanding, at a cumulative 12:1 split there was only an outstanding total of ~ 22 Million outstanding back in early '96...not sure what the float comprised... actually less than 22M, since a minor secondary offering was made in June '96...anyways...)
Once the float was collected and tucked away from the "Wall Street Professionals" the price soared to a high of 55 in May 1996.
Actually, the price soared to about 34 and then exploded to 55 in a 4-day period.
Retrospectively, that last spike up on all-time high volumes at the time looks to have been short-sellers performing a last-ditch effort.
(after many failures) 1) to get control of the fervored trading in the stock in order to 2) accumulate shares of the stock, since the available *real* shares were all tucked away in the public's hands (like DGIV).
Lacking an trading inventory of "real shares" to sell in order to drive down the stock price to levels where serious accumulation could begin, professionals borrowed shares to sell.
As I recall, a few short-selling firms got their heads handed them playing Iomega{DGIV} short.
As the {SI}AOL-and-Internet-generated public buying pressure was too great to be exhausted through usual short-selling tactics, and the stock price continued higher.
Then a new element was added to the strategy. In April
and May '96, Iomega became the target of what was, I believe, a
coordinated negative media effort by "Wall Street" to take control of
the trading price of Iomega. Despite Iomega posting quarterly all-time
U.S.-company historical growth-rate figures, it was hard to find
anything but negative news items coming out about IOMG in the Wall
Street Journal, CNBC and other business columnists such as Herb
Greenberg at the SF Chronicle (now at thestreet.com).
(One SI poster, Young Nguyen, I recall started keeping records of the various negative news pieces, so curious did their prevalence seem.)
Iomega investors were perplexed by the incessant flow of negatively-angled news, at a time when its fundamentals seemed so solid.
CNBC is owned by General Electric. I've come to believe that, when appropriate, CNBC is used to propagate biased stories at the behest of the GE (and other?) specialist firm(s): The CNBC "business reporters" become company stooges who are fed angled stories (e.g. Joe kernan) for bigger interests behind the scenes.
These repeated negative news about IOMG came across multiple
media outlets and appeared at a time when short-selling in Iomega was
expanding. I don't believe it was coincidence. Because of all the Iomega "bad news" appearing simulaneously from many fronts, a notion arose that *still* permeates the IOM thread:
"Wall Street Hates Iomega!" What I observed, however, was something totally different.
What Wall Street really "hated" was *not* Iomega-the-company, but rather being caught with its pants down, so to speak, holding something other than a good portion of the float of shares that the MF internet/tv promotions had originally directed into the hands of the "little guy."
KEY POINT HERE
With each epehemeral price decline on low volumes, stop losses are hit, despondent long-term holders cash out, and higher, substantive volume comes in to accumulate at low prices...and the net effect is that portions of the float of shares are transferred from the original "early-bird" arena to another that was left out-in-the-cold a few years earlier.
Eventually -- now that ownership of the float is in the "proper hands" -- "Wall Street will be in love with Iomega,"{DGIV}
and glowing reports about the company will appear at price-cycle highs (to generate buyers for *distribution* of stock) instead of negative hype (used previously to scare away buyers to facilitate *accumulation* at lower prices).
I only mention Iomega as an example of what might happen as DGIV begins to fulfill its potential, its fundamentals solidify, NASDAQ listing is attained and new shares are issued.
Note: Wall Street is already Hott on DGIV's heels so this may
not be an issue.
If the public (i.e. "us") continues to sweep up the float, I suspect we could see a similar negative news strategy eventually deployed against DGIV to shake out holders of the early small float.
I'm only anticipating, and it likely wouldn't be for
awhile. But the tactic worked with Iomega, I believe, and it could
happen again if the promise of Digitcom materializes before Wall Street awakens and manages to accumulate its "just due."
They are not sleep on this one Believe me!
I wonder what percentage of the float that MMs can tolerate being short.
What options do they have besides wild price swings to ferret out sellers at high prices and using early-morning price dips to pick up stop-losses to cover.
Perhaps they're holding out for a secondary offering and a new
batch of investors less stingy than the current DGIV-a-holics, a new
batch who'll trade their shares, providing more opportunities for the
MMs to cover their exposure.
Likely But, they may not have Time, especially IF the 2nd offering is @ $15.00 or So..
It's important to continue finding fresh buyers.
The (passive) recruitment of new buyers is what the {SI}Motley Fool did for {DGIV}Iomega stock.
The "Wall Street Professionals" were forced to resort to outlandish negative media tactics to help manage their short-selling exposure."
"Internet Investor Teamwork" will prevail"!
Again, many thanks, to Eric.
Parts inserted were done by me and parts of the entire synopsis were omitted...The Main Points are present IMHO.
PS Eric, lemme know what ya think...
bg |
