David
The train is coming, if you want to stand on the tracks, be my guest.
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From : Briefing.com Apr 1 1999 5:10PM
Re : Story Stocks Thu Apr 1 1999
Story Stocks®
Thursday, April 01, 1999
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Updated: 01-Apr-99
Quotes at time of story, top stories today: (BCST 08:55) (SGI 09:25) (IONA 11:00) (DAYTRADER 12:30) (CTAC 13:10) (ZD ZDZ 14:50) (DAYTRADER 15:20)
15:20 ET******
(DAYTRADER) Nothing ignites a rally in Internet stocks like an acquisition, especially when high-priced stock is used as the currency. Investors are taking the Yahoo (YHOO) buy-out of Broadcast (BCST), for more than $5.5 billion, as confirmation that streaming media content software/services will be one of the areas that gives the Internet revolution its next shot in the arm. But, while investors/traders have lifted almost half-a-dozen stocks in sympathy with Broadcast.com, in actuality, the pickings are extremely slim past RealNetworks (RNWK 149 +23 13/16). In fact, RealNetworks is the only of the companies in this group with a top-line that isn't laughable. Briefing.com takes a look at the stocks traders are clamoring over today:
Stock 1998 Revenue (Yr/Yr Change) 1998 Loss Price/Sales Ratio Market Capitalization 52-Week Range
RealNetworks (RNWK 149 +23 13/16) $64.84 mln (+98%) $16.4 mln 68 $4.46 bln 15 1/4 - 145 1/2
InterVU (ITVU 57 +12 5/8) $1.71 mln (+1088%) $11.1 mln 359 $614 mln 5 1/8 - 54 1/2
*Navarre Corp (NAVR 15 11/16 +1 3/4) $0.25 mln $3.9 mln n/a n/a 2 3/16 - 27
Digital Lava (DGV +12 3/16 +15/16) $1.46 mln (+159%) $3.73 mln 38 $56 mln 5 - 17 1/4
audiohighway.com (AHWY 12 5/8 +1 9/16) $0.14 mln (+3375%) $5.87 mln 107 $15 mln 6 - 16 1/2
*Financials of company's NetRadio unit, which recently filed for an initial public offering
14:50 ET******
ZDNET (ZDZ) and ZIFF-DAVIS (ZD) Who says the market is efficient? Here's unarguable proof it is not. Ziff-Davis's ownership in its newly spun-off internet subsidiary is worth more than all of Ziff Davis assets, as valued by the market. Take a look at this:
Company Stock Symbol Price Market Cap
Ziff Davis ZD 22 1/4 2,250
ZDNet ZDZ 43 1/4 3,092
ZD's 85% of ZDZ 2,628
Ziff Davis spun off 15 percent of ZDNet yesterday, and retained the other 85% for itself. Based on today's price, ZD's 85% of ZDNet is worth $2.6 billion. But all of Ziff-Davis can be had for only $2.2 billion. Not only do you get an instant $400 million profit, you would own all the rest of Ziff-Davis, a publishing giant with $1 billion in revenue. Market capitalizations are supposed to reflect the overall value of the company, with stock prices being only a proportion share. The traditional arbitrage play here would be to short ZDZ and buy ZD in equal positions. As the gap closes, you are guaranteed to make money. But you can't short ZDZ since it is an IPO. Also, this type of arbitrage is usually done by big players, who can affect prices simply by the position they take. But they aren't present here. Even more interesting, Ziff-Davis has retained an unusual right to convert their ZD stock into ZDZ stock if the market cap of ZDNet exceeds 65% of ZD for 30 days. Right now it exceeds 135%. ZDZ is a tracking stock, which only means that it does not have a separate corporate existence, and the ZD board controls both entities. The Ziff-Davis board clearly saw that the market would put a higher multiple on ZDZ than on ZD, and if this keeps up, ZDZ will be diluted as ZD stock gets converted. You've got to give the Ziff-Davis board a lot of credit, they are creating shareholder value out of thin air.
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