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Non-Tech : London Pacific Group - LPGL doubles... -- Ignore unavailable to you. Want to Upgrade?

To: rupert1 who wrote (367)	4/22/1999 6:19:00 PM
From: still learning	Respond to of 737

The run up and fall off may or may not happen. They depend on psychology, not underlying value of the company. Any IPOs should drive up the shares of LPGL. Whether they do so in advance of the IPO and then fall back, or continue after the IPO will depend on the performance of the IPO on day 1,2,3,4,5, etc. But the question of underlying value is more complex than that. It's like NAV in a mutual fund. A better comparison than a DBCC is SFE, which for 30 yrs has taken co's public via "rights offerings" to its shareholders. SFE has a well-established pattern of running up prior to a new IPO, falling back briefly, then running up again post IPO. The IPO and/or rights offering plays much more like a dividend -- which is available only up until a certain date (the IPO). SFE, like LPGL, retains an interest in the newly public company and the rights are for new shares. Therefore the shares retained by SFE go up in value, they do not disappear as in a spin-off, thereby increasing its "NAV". SFE runs up prior to rights offerings then sells off when it is "ex-dividend" so to speak. Even in that scenario, SFE is worth more even after the rights offerings are "ex-dvidiend" because it now has another public company to calculate into its mkt cap. LPGL, unlike SFE, doesn't offer rights in its new companies. But it does retain an interest. The run up in SFE is more based on "do I get the shares" in the IPO than it is on "is this a great IPO" The runup-selloff-runup pattern will likely apply to LPGL because when an IPO is announced people's imaginations can run wild -- will NETP be the next EGRP, AMZN, VERT -- of course these companies are in different businesses, but what does that matter. Then it gets priced at 10-12. Pretty low. Does that mean it's a dog? Are they low-balling it for a big day one runup? Uncertainty rules. Then the stock goes public. We know what it's worth. The market will have probably overestimated its value. To LPGL is it worth $3 shr? $6? $8? Guess what -- the value of NETP and NETG will likely be between $6 and $10 share total. At that pointwe'll know that we're paying $21-25 for the rest of LPGL. The market will readjust to decide if that's a steal or not. If NETP trades at $45, imaginations will run wild again -- all those other companies must be worth similar valuations. LPGL must be worth $40, $80, $97. Spreadsheets clicking away with valuation models, on non-public companies we know little about. Inevitably we will overvalue LPGL in the short term and it will correct. That's my 2c