A few random observations on the dynamics of the GBLX secondary, to add to Robert's:
1. luther - Normally a stock falls after a pricing not before....
Actually, that is not so. Typically the syndicate bids the stock down, even in a strong market, so that its clients will be "in" at a good price, compared to the trading range immediately preceding the offering. Then the syndicate stabilizes like hell, especially in a weak market, to prevent the "good price" from looking expensive. This is what the syndicate and equity trading desks of the houses are paid to do.
2. Reduction in size of the offering--in all secondaries, where selling shareholders have piggy-back rights, the underwriters have the right to cut back the size of the selling shareholder allotment if the syndicate believes that market conditions are such that the size of the selling shareholder block will jeopardize the ability to sell the primary (GBLX) shares. And, right now, market conditions stink. Robert is correct to observe that it is rather remarkable that this deal got priced tonight. Remember, SSB's client is GBLX, not the former FRO D's and O's and other insiders who are selling. The fact that the selling shareholder block was some 15-odd million additional shares is, well, yes, ugly, but the float, the acquisitions, the free use of GBLX share currency in those acquisitions is one of the aspects of owning this stock that we have to live with. The shares outstanding is huge, as is the Company's vision.
By the way, it may be that a part of the cut-back in shares offered also went to a part of the originaal GBLX allocation: it was, imo, no accident that Crescent LLP bailed out of the late rounds of the UK wireless spectrum auction last week as the Naz hit its ugly speed bump. Management knew then that the thought of excess funds on hand was fleeting, as the markets deteriorated.
3. In addition to the ugly market for tech stocks, the Street right now hates GBLX and doesn't care much for the rest of the sector either, for that matter. Someone aptly posted the losses in NXLK, Q, WCII, MFNX etc. So, we don't have the best of all possible worlds.
4. GBLX lost its darling status once it ceased to be a pure-play bandwidth company in mid-1999 (not that the pure-play would have saved it either, see #3 above). Winnick made it too complicated for the knee-jerk analysts who, these days, like everything spelled out for them, right down to the earnings/loss/EBITDA/FFO per share. The business model IS complicated and, worse, not yet wholly in place. Too many unknowns, uncertainties, business segments and opportunities. Changes in accounting treatment of fiber sales, declining LD growth, ILEC stagnation, obscure ramp of the data sales over fiber plus integrating all the acquisitions. Right now, this is a stock the analysts love to hate. And, truth to tell, the percentage ramp in the data transmission/web hosting sector has yet to trumpet "10-bagger all over this stock". Not to mention that the jv's (Asia GC, as prime e.g.) are just beginning to take shape.
5. I think that if you want to believe in the business model, and pre-eminently the one planet one network concept, you have to suspend the short-term focus on an ugly period in the stock and in the market. That's not to say this is a slam-dunk story, as holding this stock bears risk, obviously. But there is also opportunity where risk and adverse price moves abound.
6. Aside from the liberal use of the stock as currency, and the massive capital requirements, what, fundamentally, has changed in the story? I think Robert has done an excellent job in pointing out how the story is much better and more multi-faceted than it had previously appeared on the surface. And I think he is right that you have to gut through this period and give the story a chance to play out.
The NAZ has changed--the "living is easy" period has come and gone and there is a lot of carnage out there to what were, once, some very fancy names. That backdrop may make holding on to GBLX a bit more realistic and a bit easier. How many other "stories" out there do you buy these days?
GBLX has an asset or two in place/first mover position that are not easily duplicated. Some may call management stupid, but they are working through a very, very challenging piece of infrastructure. Most of the news (content that, content this/interoperability/connectivity/wider pipes/video CC along with data, networks) seems to assume that there is a way of getting all that stuff from here to there.
Steve |
