P/W report... since i own a few shares and have commented once or twice on the thread, i thought this might be of interest to all...
OPEN MARKET: $20M PRIVATE PLACEMENT OF STOCK
Paine Webber
James Preissler
July 31, 1998
PW PW PW PW PW PaineWebber PW PW PW PW PW
Rating=1 (OMKT)
Closing Price=$15
Current FY EPS EST=$(0.29)
Next FY EPS EST=$0.25
FY End=December
7/31/98
OMKT: $20M PRIVATE PLACEMENT OF STOCK
KEY POINTS
1. On July 31st, OMKT announced it has received a $20m private placement
from CMG Information Services and Heights Capital Management.
2. We believe this reinforces the ongoing cooperation between CMGI and
its portfolio of companies and OMKT.
3. We are maintaining our Buy (1) rating for OMKT with a 12-month price
target of $25 and continue to focus upon the key emerging CSP
opportunity.
INVESTMENT SUMMARY
OMKT ANNOUNCED IT HAS RECEIVED A $20M PRIVATE PLACEMENT FROM CMG
INFORMATION SERVICES HEIGHTS CAPITAL MANAGEMENT
OMKT announced it has received a $20m private placement from CMG
Information Services and Heights Capital Management. With the
investment, OMKT has approximately $43m in cash, which we believe should
be sufficient to fund its operations going forward. We are projecting
OMKT's first signs of profitability to be in Q4 this year. We believe
this private placement reinforces the ongoing cooperation between CMGI
and its portfolio of companies and OMKT. GeoCities, a CMG affiliated
company, has a deal with OMKT and Internet Commerce Services Corp.
(ICOMS). In addition, on July 13th, Navisite, another CMG unit, agreed
to use OMKT's Transact software. On July 20th, CMGI's Engage
Technologies and Accipter recently announced an integration of their
technologies into OMKT's products. Not only does the investment
validate OMKT's technology by a significant customer, we would expect to
see continued partnerships between OMKT and CMGI's holdings. Heights
Capital Management participates in equity financing for emerging growth
companies. We believe this private placement, the investment by Intel,
and OMKT's strong customer base lend strong support for OMKT's product
leadership in electronic commerce.
Some terms of the $20m deal:
-- 1,338,912 shares at $14.94 per share of OMKT were exchanged for
cash
-- Additionally, 334,728 warrants were issued at an exercise price of
$16.43 per share, which upon exercise could result in an additional $5m
in cash
-- With an estimated 38m shares outstanding for 1999, we expect about
4% dilution.
WE MAINTAIN OUR BUY (1) RATING AND OUR TWELVE-MONTH PRICE TARGET OF $25
We continue to estimate approximately 50%+ yearly total revenue growth
for 1999. The peer group is trading at approximately a 7x multiple that
provides a price target of approximately $25. Therefore, due to the
defensibility of the recently granted patents and the continued growth
in CSPs (and recurring leverage they provide), we are using a one-year
price target of $25 and maintaining our Buy (1) rating.
RISKS
Open Market has limited operating history, and no operating profits.
The stock should be considered for high risk tolerant investors. Open
Market competes in a highly competitive as well as rapidly changing
marketplace. Any failure in execution could dramatically impact its
revenues. The company could potentially compete with a number of larger
competitors such as Microsoft, IBM, Oracle, and others, who all have
significantly larger resources, sales organizations, and customer bases.
In addition, electronic commerce in general and electronic commerce
software is a nascent market with little forward visibility. In
additional, Internet stocks have high betas, and high volatility, and
should be considered for risk tolerant investors only.
Additional information available upon request.
PRICES OF COMPANIES MENTIONED AS OF JULY 30, 1998:
CMG Information Services CMGI $69.38
International Business Machines IBM $133.38
Intel 1 INTC $87.63
Microsoft 1 MSFT $113..44
Open Market 1 OMKT $15.00
Oracle 1 ORCL $26.69
1 PaineWebber, Inc. makes a market in this security. |
