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Technology Stocks : K-Tel (KTEL) Have the cheesy '70s records come to an end? -- Ignore unavailable to you. Want to Upgrade?

To: Philip H. Lee who wrote (473)	4/21/1998 2:07:00 AM
From: Secret_Agent_Man	Respond to of 3203

The Article:K-Tel Shares Soar; Internet 'Insanity' Boosts Demand (Update1) Bloomberg April 20, 1998, 12:31 p.m. PT (Adds date of announcement in 2nd paragraph, company not commenting on stock movement in last paragraph.) Minneapolis, April 20 (Bloomberg) -- K-tel International Inc. stock rose as much as 73 percent as the company's plan to sell records via the Internet continued to create a demand for shares that far outstripped supply. K-tel, up more than six-fold since announcing its Internet plan on April 9, rose 13 13/16 to 42 1/2, and was the second most active U.S. stock with 12.8 million shares traded. Earlier, the stock reached 49 1/2. Other Internet-related shares, such as Yahoo! Inc. and Infoseek Corp., also continued a rally that some investors say is based more on expectations that the stocks will keep going up than on outlooks for future earnings. Yahoo rose 4 1/4 to 125 3/4, bringing its year-to-date gain to 82 percent, while Infoseek gained 2 1/4 to 38 15/16 and is up 262 percent for the year. ''It's just the public's insanity,'' said Anthony Elgindy, chief analyst of Key West Securities Inc. in Hurst, Texas. The firm said last Thursday it would short K-tel stock, betting it would fall. By noon Friday, it reversed its decision. Elgindy said he decided not to short K-tel -- borrow stock, sell it at a high price and then give it back to the owner when the stock is cheaper -- when he realized the ''public's insanity is greater than the reality.'' Sheer demand for a limited supply of shares is driving K-tel up, traders said. By 2:45 p.m., more than 11 million shares changed hands, yet only about 4 million shares exist and at most 1 million of them are available to the public. Microsoft Corp., by contrast, had 9 million shares traded today, but has more than 1.5 billion shares that can be traded. ''Market makers are getting squeezed,'' said Gary Kaplowitz, a head trader at Fahnestock & Co. in New York, which has been making a market in K-tel shares, buying and selling to and from clients. People who shorted K-tel and other Internet shares, ''are paying any kind of price to get back in,'' to cut their losses before the stocks rise any more, Kaplowitz said. This causes a so- called short squeeze, driving up prices as the shorts rush to buy. Elgindy even recommends buying K-tel in the short term. ''Now it's a go, but the bubble will burst,'' he said. 'One thing about a short squeeze is it always ends.'' Minneapolis-based K-tel, which announced plans for its K-tel Express Internet site late Thursday, will compete with online retailers CDnow Inc. and N2K Inc. starting May 1. To promote the site, K-tel plans to tap the more than $30 million it now spends on television advertising for its pop music compilations, such as ''Club Mix'' and ''Hot Country.'' A company spokesman declined to comment today on the stock's movement. --Vernon Silver in the New York newsroom (212) 893-3037.ltk