Here are 2 articles about Bid.Com in the Canadian 'National Post' - Saturday Apr. 2/99. I'm posting them because the web site dosen't give a direct link to the article.
If you want the link it's nationalpost.com and then search bid.com and you'll find today's articles. SI even gets a mention.
It talks about the stock manipulation by the MM's and how they knock it down to create volume and how they may knock it up to also create the same volume. They also talk about a securities company in Toronto that shorted the stock. HMMMMM.
ARTICLE #1
Tower of babble pumps up bubble
Chat lines spin web of gossip around Net stocks
William Hanley
Financial Post
The Tower of Babel was intended to connect heaven and earth. According to the Old Testament, the builders came up a little short when Jehovah confused their language, and Babel has come to mean a confusion of noise and voices.
And then there is the Internet, a tower of babble built to connect virtually everyone on earth in cyberspace. They tell us it's going to be a big thing, this Net, something that will create communication heaven on earth.
But, the babble is blinding. And nowhere is it more of a jumble of incoherence assaulting the common senses than on the chat lines spinning a web of gossip around the Net stocks themselves.
Take Bid.Com International Inc., the online auctioneer. Please. On one Web site alone -- www.techstocks.com -- more than 24,000 postings on the stock constitute a "thread" containing a babble of misinformation mostly aimed at pumping hot air into the Bid.Com bubble. We mention Bid.Com because it is at the centre of a vicious battle pitting short-sellers, who believe the stock should be hammered down, against those who like the play, many of whom have made big profits or have paper profits to protect.
Yesterday, we reported that one major brokerage sold Bid.Com short at $28, just below its high, and covered the position at $16. When the stock sank as low as $8.50 on Thursday, then began recovering to close at $12.45, a trader at the brokerage said it was an opportunity to begin building a short position again because he was certain the stock could start going back toward the 56¢ level of last October.
Bid.Com (BII/TSE) rose $2.05 to $14.50 yesterday, showing that Net mania is still alive and well.
While we reported that Bid.Com was the target of short-selling, we certainly don't advise anyone to short any Net stock. The week's events show how dangerous it can be.
An article about Morgan Stanley & Co. analyst Mary Meeker in The New Yorker magazine spooked Net investors on Monday, driving the group down 14% in one day and slashing 5.5% off the Nasdaq composite index.
To some, it looked as though the end game was in motion for the Net bubble.
But by Friday, Mary Meeker was forgotten, Nasdaq was back within sight of a record,and e-tailer Amazon.com Inc., a lightning rod in the sector, had taken out its own high and was well above $200 (US).
Babble continues to pump up the Net bubble. And the thing about financial bubbles is no one ever knows when they're going to deflate.
Index debate: Bid.Com's inclusion in the Toronto Stock Exchange 300 composite index has revived the debate over whether the qualifications for inclusion in Canada's market benchmark is be upgraded to go beyond simple market capitalization, which is basically how it stands.
While the debate began in earnest after the Bre-X debacle a couple of years ago, there's no indication that the TSE is about to make any changes.
Officials point out that the TSE 300 simply reflects the market as it is, that the new Standard & Poor's/TSE 60 has the tough qualifications necessary for inclusion in a true blue-chip index.
Of course, the problem is that the indexers are forced to buy the stock of speculative plays like Bid.Com, which might not belong in many investors' portfolios.
On the other hand, speculative plays are part of the market, and if you want to buy the market, you have to buy them, too.
Big.com: The biggest Internet stock is America Online Inc., which vaulted up the market capitalization ranks into the number 16 spot with a value of $136.5-billion (all figures in U.S. dollars).
The power and potential of the Net is such that AOL has accomplished this feat on revenue of just $2.6-billion in 1998, which means the company sports a price-sales ratio of 52:1.
The Street's interest in the Old Economy is such that the world's biggest company, General Motors Corp. (1998 revenue: $189-billion) is ranked only 49th in market cap with $58.3-billion and a price-earnings ratio of 18:1.
Another sign of Net power is that online retailer Amazon.com has a market cap of $33.7-billion, which is more than twice that of old-line retailer Sears Roebuck & Co.
ARTICLE #2
"How not to sell Bid.com to Americans
Online auctioneer betrayed by lack of Nasdaq knowledge
Paul Kedrosky
National Post
On the popular CBC television show This Hour Has 22 Minutes, there is a regular segment called Talking to Americans. In it, the puckish Rick Mercer visits a random U.S. city and asks Americans questions like, "Should we use ground troops in Gilles Duceppe?" Not surprisingly, most Americans have no idea who the Bloc Quebecois' Mr. Duceppe is. And thinking his name sounds close enough to Kosovo/Serbia/Montenegro, they go on to wax nuttily (from a Canadian's point of view) about the pros and cons of sending ground troops into Gilles Duceppe.
While it is funny, it is more than a little strange. Why should Americans know who Gilles Duceppe is? Is it much different from an American wandering around Saskatoon asking Canadians if we should send ground troops into Lamar Alexander? No, not really. So why do we find it funny? Partly because Canadians know that Americans are an inward-looking bunch, but mostly because Canadians, despite living next door to the United States, grossly overestimate how often Canada shows up on the U.S. radar.
The most recent example? This week's carnage in online auctioneer, Bid.com. While Bid.com had been featured prominently in oodles of Canadian press coverage over the past six months as it shot from penny-stock status to $30, it had barely blipped onto the U.S. consciousness. So when it began trading this week on the Nasdaq market in the U.S., Canadians goofily figured that Americans already knew about their cherished Bid.com and would sweep it up as excitedly as they had. They were wrong, and the stock price tumbled by more than half.
A brief aside: While I should probably be happy watching this overpriced stock fall from its heights, it mostly makes me unhappy. Whatever you might think of the company's principals, they have lost money right alongside investors. They don't deserve the hiding they have had this week at the hands of the Canadian media, fickle investors, and opportunistic analysts.
Case in point: Bid.com's stock fell further mid-week after a Canadian analyst weighed in with a negative report. Angry Canadian investors blamed the analyst for Bid.com's poor performance. The truth? A report from a small Canadian broker had zero impact on U.S. trading in Bid.com. Canadian investors are again demonstrating ample ignorance about the U.S. market -- and that ignorance has cost them dearly.
Because the differences aren't just psychological or geographical; they extend to the markets themselves. The Nasdaq market is utterly unlike the Toronto Stock Exchange. The former is a dealer market, and the latter is closer to an auction market. And the difference matters.
Most people know what an auction market is. It works when would-be buyers and sellers come together and make or accept bids on something they want. I want three Pez dispensers, and I'll pay 25¢ each. Someone offers me three at 35¢ each. We split the difference and call it a day.
The advantage of an auction market is that you tend to get a good price -- if you haggle long enough. But that's also the main disadvantage. To get that good price, it may take a while, and in rapidly changing stock markets you may want to make a trade more than you care about whether you get the absolute best price.
And that's where dealer markets come in. Dealer markets are like having someone standing there always ready to trade. If you accept the price at which they are offering stock -- hitting the ask, in industry lingo -- you are guaranteed to sell your stock. You can't split the difference, however: There is no auction. The advantage? It makes dealer markets speedy stuff, the sort of place you go if you want to move a lot of stock in a hurry. The disadvantage, of course, is that you're more or less guaranteed not to get the best price. In effect, you're paying for liquidity.
Unsurprisingly perhaps, things get woolly in practice. For example, because only a small number of dealers are "making the market" in any individual Nasdaq stock, and those dealers tend to follow one of their number's lead, there is a kind of price-fixing going on. Dealers set prices to create volume, because volume creates commissions (from customers) and trading profits (for themselves). They don't care which way a stock price changes as long as there is volume.
On a new stock (like Bid.com) that has had a big price increase, they might try dropping the price significantly and see if that shakes any sellers out of the trees. If it does, they'll keep dropping the price until the number of buyers swamps the sellers and then they'll go other way, or even let the stock trade in place for a little while. It is a conscious process, one very unlike the slow and steady grind toward best price that takes place in an auction market. It is a hunt for volume.
It is what happened with Bid.com this week. Dealers in the Nasdaq market unsurprisingly tried dropping the price a little, and sellers began popping up. Short-sellers, like the eponymous and influential Mr. Pink of online stock service Silicon Investor, saw the opportunity, and flogged their followers into shorting the stock. Nervous investors -- mostly Canadians -- piled out of Bid.com's stock in droves.
Pleased with this early success, dealers kept right on dropping the price. They knew that the stock had had a big run-up and that there must be many people holding Bid.com stock who could be shaken out with a well-placed kick to the tree trunk. When short-sellers saw Bid.com's blood in the water, selling quickly reached epidemic levels. Things have since settled down, but Bid.com's shares have migrated mostly south, with many U.S. investors holding the stock, but at much lower and more attractive levels than their Canadian counterparts.
Would things have been any different if Canadians knew the difference between dealer and auction markets? Perhaps. Most U.S. companies are used to the vagaries of Nasdaq, and before listing they knock themselves out to make sure there is ample buying interest in their stock. Because they know that if they don't supply volume, the dealers will -- and they don't care whether it is up or down. Next time a Canadian company and its investors go south looking for great riches from a Nasdaq listing, they would do well to talk to some Americans.
Paul Kedrosky is an assistant professor of business at the University of British Columbia." |
