=SMARTMONEY.COM: We Bet That Really Hertz >TRAC
(This report was originally published late Tuesday.)
By Matthew Goldstein
NEW YORK (Dow Jones)--A few weeks ago, Barry Hertz, chief executive and
founder of Track Data (TRAC), announced that his company would start issuing
a press release a day. Hertz, who's something of a showman, hoped that a
relentless flurry of announcements would attract attention to his Brooklyn,
N.Y. market-data and online-trading firm. But this probably wasn't the sort
of press release, or the kind of attention, he had in mind.
On Monday evening, Track Data announced that Hertz had lost large amounts of
money trading stocks, and owes $45 million to four unidentified brokerage
firms. And to make matters worse, Hertz pledged more than half of his 45
million shares of the company's stock as collateral until he repays the
debt. As Hertz himself likes to say in cable television ads for Track Data's
myTrack online-trading service, 'You can't make this stuff up.'
Unless the CEO comes up with $45 million in cash, the brokerage firms will
be able to take possession of some 25 million shares of Track Data stock.
And since Hertz is Track Data's majority shareholder - owning 72% of its
outstanding stock - that means the four firms could become Track Data's
biggest owners.
The disclosure of Hertz's trading losses comes just days after Track Data
announced that it had hired an investment bank to explore a possible sale of
the company. The company has seen its stock price stumble badly in recent
weeks - falling 64% before Monday's announcement. And the news about Hertz's
trading woes didn't help. Shares of Track Data closed Tuesday at $2.03, a
drop of 32% from the day before.
Not surprisingly, officials at Track Data weren't too talkative Tuesday.
Hertz did not return several phone calls. The company's lawyer, Oscar
Folger, was also unavailable for comment. Meanwhile, Jay Gelman, Track
Data's senior vice president for sales, describes the incident as a private
matter 'between Barry Hertz and these four concerns.'
But clearly, the revelation that Hertz lost large sums of money trading
stock is not exactly a plus for the image Track Data is trying to cultivate,
particularly for its myTrack online system. Last fall, the company began
spending heavily on television and print advertisements to promote its
one-year-old trading system. myTrack, which has a core group of about 15,000
customers, caters to active online traders who buy and sell stocks several
times a day. Many of the company's recent TV spots feature testimonials from
real myTrack customers and Hertz himself.
The company press release did not disclose what stocks Hertz had lost money
trading, except to say he wasn't trading Track Data securities. It also
didn't say how Hertz had incurred those losses. Gelman says the losses
extend over a few weeks and coincide with the sharp drop in the Nasdaq
Composite Index. But Gelman says he does not know how long Hertz has to pay
off the debt, nor which brokerage firms are owed the money. 'The concerns
are holding the |
