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Technology Stocks : Charter Communications (CHTR) -- Ignore unavailable to you. Want to Upgrade?

To: sandintoes who wrote (836)	12/1/1999 8:19:00 AM
From: EyeDrMike	Read Replies (2) \| Respond to of 2437

zdii.com December 1, 1999 7:36am THE DAY AHEAD: Investors toy with new Net stocks as quiet periods end By Larry DignanTDAIN ZDII Investors have apparently caught on to the IPO quiet period game. In recent weeks, quiet periods ended for a host of newly public companies and like clockwork underwriters emerged to tout the stocks. Nothing new there, but the difference now is the easy gains are no sure thing. We all know the underwriters are paid to say good things about companies they bring public. It's their job. Initiating coverage on a client company after the quiet period ends is like showing up for work on time. Have an opinion on this? Add your comments to the bottom of this page. This new coverage -- usually in the form of "buy" ratings -- is hardly objective and conflict of interests abound, but investors usually fall for it -- until recently. Quiet period expirations are so predictable (25 days from the IPO) that traders have adopted a "buy on the rumor sell on the news" approach. The end result is some unpredictable trading when the underwriters actually start talking. Webvan (Nasdaq: WBVN) surged in early trading Tuesday after an army of underwriters started coverage. Robertson Stephens, Donaldson, Lufkin & Jenrette, Goldman Sachs, and Thomas Weisel gave the stock some form of "buy." Those early gains, however, couldn't stick and Webvan closed flat at 24 11/16. Webvan was helped along early in the session on news the company was expanding. The underwriters pushed things along, but investors quickly cashed in profits made earlier in the day. If you were an investor with poor timing, you were easily burned. On Tuesday, BancBoston Robertson Stephens, Merrill Lynch and Goldman Sachs started coverage of Cobalt Networks (Nasdaq: COBT). Robertson Stephens gave Cobalt a "buy," Merrill Lynch gave the stock a "near-term accumulate, long-term buy," and Goldman came in with a "market outperform." The three ratings were basically bullish, but Merrill did note Cobalt shares are up 600 percent from their IPO price of $22. Investors initially pushed shares down about 9 percent in rocky trading Tuesday before shares rebounded to take off again, perhaps on Linux related hype. In anticipation of the quiet period expiration, traders bid Cobalt higher on Monday as shares closed at 156 1/2. On Tuesday, Cobalt hit a low of 140 before rebounding near midday and closing above 163. In Cobalt's case, investors bought on the rumor, sold on the news and later bought on the news. Cobalt was lucky enough to gain on the underwriter coverage. Plenty of new Internet stocks don't. Shares of newly public companies are gaining the day before the quiet period ends. You know coverage will be bullish so why not get an early jump on things? That thinking has made quiet period expiration gains anything but a sure thing. Silicon Image (Nasdaq: SIMG), PlanetRx.com (Nasdaq: PLRX), Breakaway Solutions (Nasdaq: BWAY), and Calico Commerce (Nasdaq: CLIC) are just some of the stocks that fell after underwriters started coverage of the stocks with bullish ratings. Tickets.com (Nasdaq: TIXX) gained 8 percent or so Tuesday after CS First Boston, EOffering, and SG Cowen started coverage with "buy" ratings. But shares fell on Monday -- when the quiet period ended -- as Morgan Stanley Dean Witter started coverage with an "outperform" rating. Not surprisingly, Tickets.com gained on Friday ahead of the quiet period expiration. Traders were playing the game and Tickets.com is about flat with its Friday price. Investors know the game now and are playing it accordingly. If you want to see a stock move and keep its gains look for two things: An analyst who isn't an underwriter starting coverage or real news such as an upside earnings surprise. Now retail investors have the game figured out, it should be an interesting trading session for Expedia (Nasdaq: EXPE) and Charter Communications (Nasdaq: CHTR) Friday. Underwriters will trot out the post-quiet period "buy" ratings on Monday.*