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Technology Stocks : Data Broadcasting Corp. (DBCC)

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To: ztect who wrote (1649)	12/11/1998 10:59:00 AM
From: Ashley800	Read Replies (1) of 5102

Thank you to both Mad2 and ztect for your response. Mad2 I agree e-commerce will be nothing but explosive. I saw a Professor on Bloomberg yesterday comparing the hype of early 1960's when catalog's really began shipping and many were saying "Catalog's were the end of brick and mortar" to today's hype. He pointed out that retail is a trillion dollar business, catalog's do 80 billion and internet commerce just 3 billion. The upside is huge for e-commerce to grab "marketshare" from both the retail side as well as catalog transaction model. The answer I'm searching for is the relationship of the two companies after the IPO. Hypothetically, let's assume CBS Marketwatch becomes very successful during 1999. It's advertising revenues double and they are profitable. How does that translate to a value to DBC? After the IPO DBC will be a stock holder in Marketwatch. Because the value of Marketwatch's stock increases (because it's 1999 revenue doubled) wouldn't this just raise the bookvalue of DBC as one of it's assets increased? If its a bookvalue increase then it should be simple to determine the effect Marketwatch's stock price should have on DBCC: If the per share book of DBC (without marketwatch) is say $3.00 (I have no idea of the right amount), and 38% of marketwatch at a $20 share price translates to an additional $1 to DBC book value, then if the stock is trading at $10 before marketwatch was ever created, and nothing else has changed, the stock of DBCC should be $11 right? If Marketwatch goes to $40 then DBCC would increase another $1 to $12. The connection being "bookvalue increase" vs "earnings increase" as DBC never gets any earning increases no matter how well Marketwatch does. Sorry if I can't articulate this any better. But the way the stocks react when announcing an IPO spinoff is as if they receive an earnings increase which would be much more desirable. One dollar in earnings with a PE of 20 would be good for a run up of 20 pts. in the stock. Whereas $1 in "bookvalue" should only translate to a $1 increase in the stock of the parent company. Is my thinking flawed? Sorry for such a drawn out question. Appreciate any help.

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