uBid stock jumps over $53 a share, baffles analysts
(Reuters 12/23 16:14:02)
By Andrea Orr
PALO ALTO, Calif., Dec 23 (Reuters) - Shares of the
Internet auction site uBid Inc. <UBID.O> gained more than $53 a
share on Wednesday, stumping even the most sophisticated
financial analysts who thought they had seen it all.
The stock, which went public earlier this month at $18 a
share, closed Wednesday at $188, but no one could come up with
a reasonable explanation.
"It's a mysterious challenge to my brain," said one
Internet analyst. "I wish I had an intelligent comment, but
this is just bizarre."
The most reasonable explanation put forth was that
investors, particularly individual investors eager to catch the
next high-flying Internet stock while it was still reasonably
cheap, had identified uBid as an eBay in the making.
eBay <EBAY.O>, another Internet auction site, which went
public in September at $18 a share, has quickly multiplied its
paper value, with shares closing Wednesday at $298.
Still, analysts warned that comparisons between the two
businesses were faulty. Though both are auction sites, uBid is
a company that acquires excess merchandise and puts it up for
sale. eBay, on the other hand, just serves as a go between for
buyers and sellers. It never comes in contact with the
merchandise being sold on its Web site, and makes its money by
charging a fee on transactions, a strategy that has been
credited for limiting overhead costs.
There are also big differences between the merchandise the
two sites sell, with uBid having a heavy mix of computer
products, and eBay offering a hodgepodge of everything from
guns to dolls.
Others said uBid bore more resemblance to another popular
auction site, Onsale Inc. <ONSL.O>, which also sells a lot of
computer products often purchased at close out.
"The problem is that the surplus auction space is already
crowded and uBid has no edge on leaders Onsale and
Egghead.com," wrote Steve Harmon, an analyst at Internet.com
"Investors may discover that fact too late after the hype
bursts."
And one institutional investor warned there was another
risk factor people might not be aware of -- the fact that
millions of more shares of uBid were due to be issued over the
next year -- which could dramatically upset the balance of
supply and demand.
uBid, which was spun off from Creative Computers Corp.
<MALL.O>, currently has only 20 percent of its shares
outstanding, although the rest are due to be issued some time
next year. |
