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Non-Tech : NetBank(NTBK)-formerly Atlanta Internet Bank -- Ignore unavailable to you. Want to Upgrade?

To: WallStreetTips who wrote (1564)	4/15/1999 9:43:00 PM
From: Triffin	Read Replies (2) \| Respond to of 2414

NTBK ... Some musings on NTBK from TMF .. -------------------------------------------------------------------- Cashing in on the Internet About 10 days ago on the Boring board, "mwf" asked about NetB@ank. The shares subsequently rose about 150%. My immediate reaction was that the large companies are not at all unprepared for this. NetB@nk's numbers are tiny in comparison to established companies such as Wells Fargo's (NYSE: WFC) already-operating Internet distribution. Other companies we pay attention to, such as U.S. Bancorp (NYSE: USB) or private companies we know, have much better numbers and product offerings. I mean, 8,000 new accounts last quarter doesn't really do much for me. And of course NetB@nk can generate lots of account growth if it wants to pay up for the deposits. NetB@ank says it has an advantage over the bricks and mortar world because it doesn't have to operate branches, and thus can pay higher interest rates on deposits, including checking deposits. Here's where I have to look at my thinking in a critical light. Can this company do what Amazon.com (Nasdaq: AMZN) did to the bookselling industry? That is, can it destroy the advantage the bricks and mortar banks have in their ability to attract non-interest-bearing, fee-generating transaction deposits from customers that are local to their areas? Just as Amazon.com brought more value to many book buyers (and buyers of CDs, prescription drugs, etc.) with its business model, will the same happen with the Internet banks? After all, if NetB@nk is going to pay more for deposits, then it decreases the relative attractiveness of doing business with a local bricks-and-mortar bank. And as I've said lately, I think people are fed up with paying huge service fees to the big national banks and are sick of feeling like they're being done a favor by being served by the big banks. NetB@nk pays more for deposits than the big banks, charges less fees, and is more convenient in many ways for many customers. So what about the valuation? Sure, it's huge. A smarter person than I made the point to me yesterday that the market is assigning the company a proxy valuation. That is, the opportunity available in banking over the Internet is so large and the available investment vehicles to get direct exposure to that are so small, that the market is acting as a signaling mechanism here. Which is not some new age thing I'm making up, either. Free markets have always been an information feedback loop. The market is expressing in NetB@nk's valuation that more capital should be devoted to the segment. Finally, on that note, NetB@nk could very easily monetize some of its market value and see a huge cash infusion with a stock offering. It could increase its shareholders equity by over 400% with less about a 15% addition to its diluted sharecount. The company would all of a sudden be trading not at nearly 30 times book value and 295% of assets but around 6-7 times book value and 242% of assets. Which are all, of course, shorthand for valuing the company. Putting a value on the company would necessitate a much deeper look into how it operates and a much more thoroughgoing process of discounting cash flows. But you get the point. If the company were a very good operator and had a management team whose heads are screwed on correctly on building shareholder value, we wouldn't have the toughest time in the world paying the latter multiples for the company. In short, we are never bound by our first reaction to things and we are constantly re-testing our assumptions. EOM----------------------------------------------------------------- Jim in CT ..