DATA BROADCAST CORP (DBCC) 34 1/2 +8 1/8In today's Stock Brief, we argued that the run-up in DBCC shares ahead of the Marketwatch.com IPO (expected Thursday) was a classic case of an Internet bubble that will soon burst. That's even more apparent after today's spike in DBCC. (A disclaimer -- Marketwatch.com can be considered a competitor of Briefing.com in the broad field of financial news and commentary delivered via the Internet.) At this morning's high of $39, DBCC had a market cap of $1.3 bln. Compare that to its lowly $113 mln market cap seen prior to the Marketwatch.com (MKTW) IPO filing on October 13. That $1.06 bln increase in DBCC market cap can be attributed entirely to the MKTW filing, yet it is impossible to believe that MKTW will justify this increase. Since DBCC will own 38% of MKTW after the offering, MKTW's valuation would have to be a mind-boggling $3.4 bln to justify the increase in DBCC's market cap (even ignoring very significant tax consequences for DBCC). A look at MKTW and the most comparable publicly traded company, CBS Sportsline (SPLN), shows just how ridiculous the $3.4 bln figure is. By any measure, SPLN deserves a higher valuation than MKTW. Its revenues in calendar Q3 were more than four times as large as MKTW's, and SPLN's recent press release confirms that SPLN has substantial upside potential in ecommerce, while MKTW's ecommerce potential is very limited. SPLN's market cap? Even after a recent spike, it's $580 mln. As MKTW's revenues are about 1/4 the size of SPLN's, a justifiable valuation would be roughly $145 mln, which is almost exactly what MKTW will be worth if it prices at the high end of its $10-12 range. Unfortunately, such a valuation would make DBCC worth about $5/share. To make DBCC worth its intraday high of $39, MKTW's stock would need to rally from an offering of about $12 to roughly $293. Not likely.
|
