To: David Lawrence who wrote (2164 ) 1/13/1999 11:33:00 AM From: michael r potter Read Replies (1) | Respond to
Will SFE trade again [soon] at around $25, which would be something like a 10% premium to NAV? If it did, that would mean the market is valuing their interest in all private deals including internet at around $79MM [est.$2.30 prem.X33MMsh]. Even if publicly traded internet stocks were cut in price by 2/3 [today is a nice start], and the froth beaten, is it likely that the market will again soon value all their private stakes in future businesses in which they have many, at $79 million? Of course there is no objective answer, but that could be an unlikely event. Even if the market shapes up and acts much more rationally [certainly not a given], 79MM is chump change-a mere rounding error compared to the market caps. of AOL, YHOO, or AMZN if they were cut by 2/3. Outside of a full blown bear market of lasting duration, there will be enough excitement to maintain a high premium to NAV. Fact: The revenue generated by the internet over the next few years will see explosive growth. Opinion: Most internet stocks have insane valuations. Those are two separate issues. SFE will benefit greatly from the growth of the internet through their private companies over the next few years. The marktet over the past four months has caught on to SFE and their future-the story will continue to spread. This will not be altered even if the publicly traded internet stocks get what some [including me] feel is their just do. We just had a bear market [Sep.-Oct.] that saw the average stock down nearly 50% from its high. During this time SFE suspended rights offerings. If the worst SFE could do was trade at a roughly 25% premium to NAV, it is difficult to imagine now what set of circumstances could cause SFE to trade at less than that-especially now that many more are finding out about the future potential of SFEs involvement in the fastest growing area of the economy. Again, it may be beneficial to divorce oneself from what one thinks should [as in totally rational-based on our opinion] and what the market perception is likely to be. It is that market perception and evaluation that will determine the price of SFE stock and IMO that perception will cause a continued and possibly growing premium to NAV over time. A 25% premium to NAV should be considered a gift. but is unlikely. I would buy SFE on any significant pullback. With all due respect to those who share a different opinion, I wish you all well. Mike
