Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : Bid.com International (BIDS) -- Ignore unavailable to you. Want to Upgrade?

To: CBurnett who wrote (25118)	4/23/1999 5:40:00 PM
From: LadyNada	Read Replies (1) \| Respond to of 37507

canoe.ca For Friday, April 23, 1999 A negative research report on Canada's Internet darling has raised the question of whether investors can rely on the recommendations of analysts whose firms have underwritten the companies they cover. "It's a difficult decision for any firm that has a close underwriting relationship to write a negative report," said Mark Pavan, of Yorkton Securities Inc., who on Wednesday did just that. Mr. Pavan said that shares in Bid.Com International Inc., which hit a peak of $32.35 on April 8, are worth $2 to $3. That comment sent the stock as low as $8.50 and the analyst running for cover from angry retail investors. "I'm getting death threats," he said yesterday. "Somebody has called and threatened to come to my house and kill me. These guys aren't serious. But it tells me I'm so right." Mr. Pavan's firm raised $9.5-million for Bid.Com in an October, 1997, private placement of special warrants and has underwritten two more financings since. As part of its compensation, Yorkton received warrants from the financing. At one point the company had the option to buy as many as three million shares, at a cost of $7.2-million. At the stock's peak those options were worth more than $90-million. Yorkton has said it exercised many of the warrants. Mr. Pavan said he started writing his report the week of April 5. It was his first report since March 11, when he labelled the stock a "speculative buy." "Why didn't [Mr. Pavan] come out with his report earlier?" a retired Montreal exporter asked yesterday. "I lost $40,000 of my retirement on this. I thought it could go up to $50." The man, who did not want his name used, said his broker refused to recommend the stock but he went ahead nonetheless. William Mackenzie, shareholder-rights advocate and vice-president of Fairvest Securities Inc., said: "Sometimes the analyst takes the rap for hitting a stock right after an underwriting . . . the analyst can't recommend a 'sell' because of an ongoing relationship or a plan to bring a secondary [offering] to the market." Mr. Mackenzie said it is common for the underwriting department of a brokerage firm to be at odds with the firm's analysts; a high stock price represents an excellent time to sell a secondary offering, although the analyst might feel it's time to issue a sell recommendation "And with a sell signal they are not going to get the underwriting, so where is the value in the transaction ?," he asked. For six months, Bid.Com has been one of the most heavily traded issues on the Toronto Stock Exchange, steadily appreciating from 56c on Oct. 19. On April 1, it was announced the issue would be included in the influential TSE 300 index. Along the way it pulled in retail investors who burned up Internet chat lines with takeover talk. In February, the company announced it was applying for a Nasdaq listing and anticipation of that took the stock to new heights. This week the Nasdaq listing finally arrived but instead of going up, the stock has dropped more than 55% in the past four sessions. Mr. Pavan said yesterday "big problems at the company" forced him to change his recommendations. In addition to the increasing stock value, Mr. Pavan started to look at the weakening gross margins. Those margins included what he called the unusual practice of including products sold below costs in its sales and marketing figures. "If you buy a laptop computer for $1,000 and sell it for $980 . . . you would have a negative gross margin. In Bid.Com's case they book that into the sales and marketing line," said Mr. Pavan, adding the full tally for how much is booked into sales and marketing is broken out annually but not quarterly. Bid.Com is set to release annual numbers next month. No one from Bid.Com was available for comment yesterday. Meanwhile, Bid.Com remains part of the TSE 300, with a complicated formula making it almost impossible to remove the stock until the index comes up for revision. This has renewed calls for stronger requirements for inclusion, such as a company's opeRating oneistory. In Bid.Com's case the company has no earnings and has been in business less than two years. "The rules are substantially different for the new S&P/TSE 60, company fundamentals are one of the four criteria examined specifically. For the time being, we hear many many comments but there are no specific plans to amend them right now," said Richard Carleton, vice-president of index and market data services with the TSE. Yesterday's trading indicated that things might not be over for Bid.com's valuation, as one broker noted the volume has shifted into the U.S market where buyers are saying, "From our standpoint this stock is relatively cheap."