i just noticed months later that STEAMROLLER made the street.com news release, this is entertaining (re:AVCO)
Top Stories: Casualty of the Boards (From TheStreet.com)
By George Mannes
Staff Reporter
11/15/98 8:06 PM ET
What do you get when you combine Internet mania, a gushing press release and an
investors chat board? For Ryan Goldstein, possibly a $2,000 mistake.
Goldstein was one of the individual investors who hopped on Thursday's meteoric rise
of an obscure Santa Barbara, Calif., company called AvTel Communications
(AVCO:Nasdaq) -- only to spend Friday wondering how much of their money they
would see again. Nasdaq halted trading in the company Thursday night.
AvTel's one-day rise began after the Internet service provider and telecommunications
services reseller touted its new service for high-speed connection to the Internet in a
press release. "50 Times Faster Than Conventional Modems? Now That's Fast!"
screamed the headline on the release issued early Thursday morning.
It wasn't long before the same exclamation-point enthusiasm hit a chat board. "AVCO is
the future of the internet" posted one "ArmenianGuru" on a Yahoo! (YHOO:Nasdaq)
Finance message board at 11:50 a.m. EST. Fourteen minutes later, one
"BedDavidat120Wall" proclaimed, "Licensing fees alone are worth over $250 million a
year!"
The stock, which opened at 2 3/8, had quadrupled to about 10 by 3 p.m. Not long
afterward, it shot into the 20s, which is where Goldstein said he bought in. Pushed
higher by coverage on the cable channel CNBC, AvTel ended up closing at 31. Trading
volume was 3.6 million shares, compared with an average of a few thousand shares
daily.
Goldstein, a 22-year-old senior at Penn State University who's majoring in finance, has
been actively investing for three years, starting out with money he received as birthday
gifts or earned from jobs like parking cars.
For the past year and a half, Goldstein has been trading online through E*Trade
(EGRP:Nasdaq). He says he does a lot of day trading and message-board watching.
His track record, he says, has been great -- "except for this."
He first learned about AvTel on the day he invested in it. At 11:42 a.m., in the "Tokyo
Joe's Cafe" thread of the Silicon Investor message board, "STEAMROLLER" wrote
simply "AVCO running on internet news."
Goldstein watched the stock gain momentum, then finally jumped in after 3:30, buying
100 shares at 22 7/16.
All was well until Nasdaq halted trading in the stock less than two hours after the market
closed, citing "additional information requested" from the company.
That's when Goldstein took a closer look at AvTel's Thursday morning press release. In
it, the company explains that its ADSL service is available only to telephone customers
within three miles of a certain telephone switch in Santa Barbara who want to link to
AvTel's Silicon Beach Communications ISP subsidiary.
AvTel, one finds on further investigation, is essentially reselling ADSL service from local
telephone company GTE (GTE:NYSE), and doing it only in the Santa Barbara area. It
doesn't even have an exclusive on the service; another local ISP, Impulse Internet
Services, will be offering ADSL connections, too, according to co-owner Ken Alker.
AvTel lost $5 million in the first nine months of the year on revenues of $34.3 million,
compared with a profit of $7,000 on revenues of $39.2 million a year earlier.
"Really, we don't have any comment," Mary McCarthy, investor relations counsel to
AvTel, said Friday. "The company writes press releases and makes disclosures of
material information. It was surprising the stock went up that quickly yesterday and that
far, but other than that, the company really doesn't have a comment."
After the market closed Friday, AvTel issued a press release. "AvTel has no proprietary
technology relating to ADSL," it stated. "...AvTel does not have any exclusive rights to
offer or provide [high-speed Internet access] in any area ... Contrary to some wire
reports yesterday, AvTel has no specific plans to extend its DSLink(sm) Service
nationally."
Friday night, Nasdaq also cleared AvTel to start trading Monday.
Where does it all leave Goldstein? "I feel used, actually," he says. Yes, he got caught up
in the stock's momentum -- and says if he had to do it all over again, he probably would
have done the same thing. But, he says, "I do still think the press release was a little
misleading."
Goldstein believes AvTel will open somewhere between 3 and 5 on Monday, and
expects he'll lose about $2,000 on the stock. He's not sure if he'll sell immediately, but is
sure of one thing: "It'll be ugly, I know that."
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