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Continuation of my message (275) posted earlier. Reasons for taking the position. Spoke with OMGA and each of the three anaysts (rob-stephens negative on it, and said would not hold in their account despite their feeling that it was the best product in their space. Felt it was too expensive and too much "free stuff" on the net was encroaching on their expertise. Lehman and H&Q, as well as the company, thought that was bunk. We knew the space was exceptionally hot, even though we were nervous that bullshit stories like JBOH and Siebert were cropping up. We agressively shorted JBOH in the high teens. No fundamental reason for its move. With OMGA, we looked for 1) finally the successful execution and roll-out of their two year product upgrade. We knew the stock at $2 was irrelevant as no brokerage firm had mentioned them in 3-4 months following three pathetic quarters and continual disappointments on upgrading their product, which was supposed to happen a year prior. It had come public at $10 18 months prior, and brokerage firms are not in the business of overvaluing IPO's. They will usually discount the true value by 10-15% to ensure a successful offering. We knew there were a number of alliances occuring in the industry, we knew the EGRP prez was on the OMGA board, we knew OMGA was planning a number of intriquing net initiatives, we knew the FutureSource pronouncement was a posturing hoax three weeks ago (witness the multi-million dolla alliance they penned just a week after it hit the tape), we knew the float was under three million and if the firm could earn any where near what the three most updated models stated it was going to be an 8-10 dollar stock. If theire were revenue sharing agreements established with other on-line brokers, potential equity alliances and continued consolidation in the space, it could run into the high teens on the hype. Unlike the Cruz brothers, who own over 9 million shares a piece (co-founders), we sold 2/3 of our position because it had nearly tripled in 6 weeks and the tech space has gotten dicey. We sold at $8, $9 and $10 and we were obviously early. The Cruz brothers, remarkably, have not registered to sell a single share. I wonder why? I have been told emphatically not to sell another share, that there will be a number of intiatives forthcoming that will support the stock. Most importantly, I am comfortable that on a fundamental basis, it probably will not drift much below $8.share. For you short geniuses, you need to ask why Lehman took a look at the prospects and put an $18 12- month price target on the stock, why Raymond James came out of the blue a month ago and put a low teens valuation on the firm, why the founders have not registered to sell a single share, why H&Q will probably have comments on the stock following a few more data points on customer adoption numbers. I have been an active short seller of many of the bullshit .com stories. I would submit that this probably is not one of the better ones to attempt it. More to come. |
