Here is the second one.
Blessed
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To: Richard B. Haenisch (2566 )
From: RocketMan
Wednesday, Jun 3 1998 8:06AM ET
Reply # of 8997
Good Morning, everyone! Yesterday you saw the best and the worst in small
business financing. On the best side, we saw a small aggressive company complete a
multimillion dollar contract with IBM, the legendary gorilla of the computer sector. This
contract has almost unlimited upside potential, and will provide jobs to many IT
professionals, solving the challenging problems in software and hardware development
as we move into the next century. And this was on top of an already announced State
Department contract, with much more to come from what I hear.
On the worst side, you saw investors buying heavily, with buying outnumbered selling
by 95%, as Rico said, and yet the MMs bringing the stock price down by the end of the
day. What a joke!
They did this by illegal shorting from US citizens through Canadian brokerages, and by
questionable if not illegal trading tactics by MMs who use exhorbitant spreads and
heavy naked shorting with the intention of bringing the price down later and covering. It
is tactics like this, widespread trhoughout the BB marketplace, that will eventually either
shut down small public company entrepreneurship, or bring down nasdaq. I don't mean
nasdaq bb, I mean nasdaq.
There is already a billion dollar class action lawsuit in the courts against nasdaq and MM
tactics, and the SEC has put nasdaq on notice that if they do not self-police themselves,
the government will do it for them. This has been reported in the press over the last
month.
However, what does this mean to INFE and to us as investors? In the long term,
absolutely nothing. In the short term, day to day, it just means that stock price
appreciation will move up and down at a pace inconsistent with buys and sells. In the
long term it means absolutely nothing, because no one can stand in the way of revenues,
for MMs and shorters it will be like trying to drink from an open fire hydrant.
Just imagine if they were able to keep the stock price at, say, $5, which they will not be
able to. But to show you how ridiculous this would be, imagine in the near future, a
company with, say $100M per year in revenue, maybe more (that's just 1000 IBM
employees, then there is state dept, etc). That would give it a book value of around $20
per share, with the current shares outstanding. With a price to book of, say 2.5 (industry
average), that would make this a $50 stock, trading for $5! To put it another way, a $5
price would give this a price to book of 0.25! Now, don't you think that if this kind of
distorted situation were to happen, every Wall Street brokerage house would be on
this stock like bees on honey? And I think Wall Street has deeper pockets than
any MM :-)
So, that is why we say just find a good company and hold, don't fall to MM tricks. But
what defenses do we have in the near term?
- Continued buying, as the word spreads of this company's contracts
- The CEO can file a complaint and force NASD to remove certain MMs, forcing them
to cover (this happens)
- A rapid move out of the BB world into listed nasdaq
- Company stock buyback programs (very effective)
- Investor complaints to NASD
- Calling for certs (not suggesting it, just listing it as a defense)
So for today, just don't worry about this puppy. This is a war, not a battle. In the end
victory is assured :-)
POWER TO THE PEOPLE |
