Bill, Here's a wannabe internet that should be on your list...
(11) Eleven to pennies????
Are you shorting K-tel. Check out the article I found.
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Message 6526608
IS K-TEL GETTING WHAT IT DESERVES?
Links:
redherring.com
redherring.com
IS K-TEL GETTING WHAT IT DESERVES?
By Peter D. Henig
Red Herring Online
November 20, 1998
They say what goes around, comes around.
If so, K-Tel (KTEL) might have a lot more coming to it.
The disco-era music retailer, which conveniently reinvented itself as an Internet company at the first sign of Net-stock madness, has just disclosed in an SEC filing that it may soon be delisted from Nasdaq due to asset requirements. Delisting would force it to trade on the less-prestigious and less-liquid Nasdaq small-cap market.
And that's not all. San Diego law firm Milberg Weiss -- the bane of many a high-tech company -- announced on Thursday that it has commenced a class-action lawsuit on behalf of people who purchased K-Tel stock between October 27 and November 17.
The suit alleges that while K-Tel's shares surged in November from less than $7 to more than $39 a share on news that the company made plans to sell music over the Internet, it also concealed information about its potential Nasdaq delisting.
K-Tel had received notification from Nasdaq of the possible delisting more than three weeks ago, but did not disclose the news until its November 17 quarterly filing -- a big no-no in the eyes of the Securities and Exchange Commission, which requires any "material event" to be fully disclosed.
K-Tel president Larry Kieves stated that he did not consider the delisting to be a material event.[ editorial comment: stiffing too much glue? ] But the market thought differently, slicing K-Tel's stock in half.
An Internet player?
This is quite a comeuppance for a company that saw its stock soar after declaring itself an Internet play -- on the strength of a press release stating its e-commerce intentions.
"K-Tel deserves almost no valuation or listing, in my view," said Keith Benjamin, Internet analyst with BancBoston Robertson Stephens.
Mr. Benjamin should know: The Internet analyst is used to seeing -- and believing in -- high-growth Internet plays with little to no net profit, like Lycos (LCOS), Amazon.com (AMZN), and Sportsline USA (SPLN). But even by their standards, K-Tel's financials look downright poor.
For the three months ended September 30, 1998, sales fell 25 percent to $18.8 million and net losses totaled $3.1 million -- a stark contrast to year-ago net income of $1.2 million. When was the last time anyone heard of an Internet company without top-line growth?
"It's got a Zapata-like tone to it," said Dana Serman, Internet analyst with Schroder & Co. The Texas fish-oil company Mr. Serman referred to also declared itself an Internet play, going so far as to make a takeover bid for Excite (XCIT); since then, it's abandoned its portal ambitions and cancelled plans to buy 30-some Web sites.
"It's hard to imagine whether [K-Tel] was ever worth where the share prices got to," said Mr. Serman.
More trouble
The company also came under fire for not disclosing management changes.
Mr. Kieves was hired as president in October, replacing David Weiner who had left the company a month before. But K-Tel did not issue a press release concerning the management shift until November 3, leading Nasdaq to criticize the oversight.
"I've never owned K-Tel, never even considered it," said Ryan Jacob, portfolio manager of the Internet Fund. "It was all just hype which took on a life of its own."
The company now maintains that it can easily raise the cash to meet Nasdaq's minimum $4 million tangible net asset requirement for listing. Tangible net assets are defined as total assets, excluding goodwill, minus liabilities.
But the damage to K-tel's reputation and share price may be too extensive for any future revival -- in a catch-22, the decline in its stock may prevent the raising of needed capital.
K-Tel's plight may reveal that even in the ether of the Internet, some companies still have to prove their fundamental worth.
"The stock price was [is ]completely removed from their financial position," concluded Mr. Serman.
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Also, see:
Message 6531309
Message 6531664
Message 6533334
Message 6536181
To: Rajiv (2836 )
From: Tom Hua Monday, Nov 23 1998 5:39PM ET
Reply # of 2840
Rajiv, all net stocks go through the roof today. Ktel did not participate in the frenziness, so it's official. WS is finally convinced that Ktel is not an internet company.
Regards,
Tom
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