From MSNBC - not good if you are long=====>
FOR MORE THAN a week now, investors who thought they were clever have been bidding up the price of Data Broadcasting Corp., owner of 38 percent (give or take) of MarketWatch.com Inc., in anticipation of today's IPO.
Because DBCC owns that 38 percent stake, it means that one share of DBCC should be equal to 7.21 shares of MarketWatch.
Here's why: Since DBCC has 32.2 million shares outstanding, and MKTW has 11.75 million, if DBCC owned all of MKTW, then each DBCC share would represent an interest equal to 36.49 percent of one share of MKTW. But since DBCC owns only 38 percent of MKTW, then each DBCC share represents an interest equal to 13.87 percent of an MKTW share. In other words, one full share of MarketWatch equals 7.21 shares of DBCC.
Got that?
It means something that recklessly enthusiastic investors in Data Broadcasting never realized — namely, that when they bid up DBCC to a peak of nearly $38.50 per share on January 11th, they were unwittingly putting an implied price of an incredible $277 per share on the upcoming MarketWatch.com offering.
Unfortunately, the MKTW after-market price rose no higher than $130, and thereafter fell to its Friday closing price of $97.50. That in turn meant Data Broadcasting Co.'s stockholders were caught way, way off base.
Expecting this would happen, hedge fund arbs began building large short positions in DBCC as the week progressed, and when the MKTW stock came to market the impact on DBCC was devastating. By the Friday close, more than 36 million shares had changed hands on some of the heaviest selling pressure ever seen on a NASDAQ stock, with DBCC finally closing down 30 percent on the day, to just under $21.75 per share.
What's up for Tuesday when the market reopens? At its current price of $97.50, MKTW implies a price of no more than around $13.50 to $14 per share for Data Broadcasting. With DBCC having closed at $21.75, there's obviously more fireworks to come. Stay Tuned.
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