To: Kenneth Yeh who wrote (235 ) 11/18/1998 12:49:00 PM From: Platter Read Replies (2) | Respond to
Another anaysis of UBID IPO/MALL..."UBID INC (UBID) Shares of Creative Computers (MALL 24 1/4 +6 3/8) are rallying on news the company's wholly-owned subsidiary, uBid, has filed its S-1/A form with the SEC to bring the company public. MALL shares have soared 30% since Briefing.com announced this news on the In Play page. Upon completion of the offering, Creative will own approximately 82.3% of the outstanding shares and 80.1% if the underwriters exercise their over-allotment option in full. uBid plans to sell 1.58 mln shares in the Merrill Lynch-led offering. The question that many traders are asking is what is the value of Creative's stake in UBID at $50 or $60, or even $80 a share. However this is really not a appropriate method of assigning a value to Creative Computer shares. theglobe.com (TGLO 37 5/8 -2 13/16) may have rocketed to $97 on its first day, but the stock now trades 61% below that level. Hence, UBID could trade down dramatically from early price levels by the time insiders have an opportunity to sell. But, unlike many public companies which hold stakes in IPOs, Creative plans to distribute its stake in uBid to MALL shareholders through a tax-free distribution. The distribution, however, will occur no sooner than 6 months after the close of the initial public offering. Specifically, uBid operates an online auction for excess merchandise, offering close-out and refurbished products to consumers and small to medium-sized businesses. The company currently conducts auctions seven days a week, offering an average of over 1000 total items per auction. The problem with this company is that it is a fourth-tier player in a very crowded space. Already, OnSale (ONSL), Z-Auction, Egghead.com (EGGS), Surplus Auction and First Auction have branding that is more prominent or almost as strong as uBid. As for uBid the stock, this group has really fallen out of favor, primarily because of the extremely skinny gross margins characteristic of the surplus auction market.
