Track Data CEO Still Hanging On After Scary Market Ride
By Gaston F. Ceron
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--You don't hear much about Barry Hertz these days. And
that's just fine with him.
Last year, the chairman and chief executive of Track Data Corp. (TRAC) made
big news when his personal trading turned him into a protagonist of the
burst stock-market bubble. Track Data, a market-data vendor that also
operates an online trading business, had to disclose that Hertz had lost a
substantial amount of money trading stocks with borrowed funds and that the
loans were backed with Track Data stock that he held.
Now, having survived the wave of negative publicity that engulfed him after
his trading losses were revealed, Hertz and his company are looking to the
next stage. Despite the slowdown that has gripped the online brokerage
industry, Hertz remains confident that his service, myTrack, will succeed.
Track Data is also focused on implementing a partnership it unveiled last
year with Knight Trading Group Inc. (NITE). And the company recently was
able to avoid being delisted from the Nasdaq Stock Market's National Market,
which had become a possibility because of a downturn in Track Data's stock
price.
And no, Hertz hasn't gone back to his trading ways. "I haven't fallen off
the wagon," Hertz said, chuckling, in an interview earlier this year. Last
week, he reiterated that he hasn't been actively investing in stocks other
than Track Data's. (His losses last year came from trading stocks other than
Track Data).
To put last year's events into some perspective, it helps to know a little
about Hertz, who looks nothing like the wild-eyed trader that his losses may
have you believe. The 51-year-old isn't like most brokerage-firm chieftains:
Major securities firms make their home in tony Manhattan, but Hertz runs his
small company out of nearby Brooklyn, N.Y. Many of Track Data's 265
employees live near there, he says, and "it doesn't hurt that I live in
Brooklyn myself."
And while Wall Street captains are often groomed from the stockbroker or
investment-banker ranks, Hertz got his start as a computer programmer. To
this day, writing software remains one of his main interests. "I don't look
at spreadsheets all day," he said. "I leave that to my (chief financial
officer)."
Hertz channeled his software skills into creating market-data products that
became well-known in the securities business. "Without their equipment it
was mind-boggling to calculate all the numbers of combinations that existed
in options," said Michael Schwartz, the chief options-trading strategist at
CIBC Oppenheimer, who described himself as being "business friends" with
Hertz.
Hertz's technology prowess was one reason why Knight, the big stocks and
options trading firm, decided to hook up with Track Data in a venture that
will cater to the trading needs of large, or institutional, investors."Barry
knows how to get software out into the market (effectively)," said Knight
Chairman and Chief Executive Kenneth Pasternak, who has known Hertz for
years. "I don't think there's many people who can say that."
Pasternak wouldn't provide an update on plans for the venture, except to say
that it's progressing as expected. In an Internet chat with investors held
last month to discuss Track Data's first quarter earnings, Hertz said that
"the institutional efforts will probably start in the (third) quarter."
After succeeding in institutional market data, Hertz decided to see if the
technology he had developed could be complemented with an online brokerage
business. The result was myTrack, a service that caters to active individual
investors. It isn't among the largest online trading firms - a recent J.P.
Morgan H&Q report ranked myTrack 16th in terms of online stock trades and
accounts - but Hertz said the business is profitable, something that not
every online broker can say.
In April, Track Data faced a hurdle that has confronted many companies in
the wake of the stock market downturn, when it was told that it failed to
meet the Nasdaq National Market's listing requirements for its stock's
minimum closing bid price. A delisting can be a big blow to a company's
image. Track Data, though, survived the scare, thanks to a rebound in its
stock price that has kept it above the $1 threshold since late April.
"We did receive a phone call from Nasdaq that basically said we're good boys
again," said Hertz. A Nasdaq spokesman declined to comment.
Recently, Track Data shares were up 3 cents, or 2%, at $1.50. The stock,
though, remains far from its all-time highs.
Another problem Track Data has overcome, Hertz said, was the issue of his
trading losses. Since the debt Hertz accumulated (the claims against him
were initially pegged at $45 million in April of last year, but were later
reduced substantially) was backed by Track Data shares, there were some
concerns that Track Data's ownership could shift if Hertz's brokers sold the
stock to meet the CEO's margin call.
More than a year later, Hertz said the problem has essentially gone away.
The broker who held his debt sold Track Data stock as recently as February,
but there have been no sales disclosed since and Hertz said no more should
be needed. Although the negative publicity stung him, Hertz said he is glad
to have put the situation behind him. He still remains the company's largest
single shareholder, despite the sales.
Hertz also said he isn't looking to sell the company, something he
considered in the past. "We're happy the way we are," he said.
Looking ahead, Hertz is concentrating on growing his businesses - market
data and online trading - amid the market slump. He recently said that Track
Data could earn about 20 cents a share for all of 2001. Track Data cautioned
that this is just a rough estimate.
If it pans out, Track Data's earnings would rise from 3 cents a share in
2000. The comparison, though, isn't exact because Track Data has been buying
back stock, which affects how per-share figures are calculated. Track Data
said that the buyback wouldn't affect its earnings per share significantly.
-By Gaston F. Ceron, Dow Jones Newswires; 201-938-5234;
gaston.ceron@dowjones.com
(END) DOW JONES NEWS 06-13-01
12:43 PM
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