The last time theglobe.com (TGLO) thought about going public, the online community builder and its underwriters figured it was worth between US$11 and $13 a share. Then they realized they'd been too optimistic, and lowered the price range to $8 to $10. Then they lost heart and canceled the offering entirely.
On Friday, theglobe.com returned with a modest target price of $9 a share, fully in keeping with the company's previous valuation. The stock closed at $63.50, an increase of 600 percent -- easily topping the previous record first-day gain of 249 percent posted by Broadcast.com.
Mass hysteria? Temporary insanity? Swamp gas? You be the judge.
"There are a lot of retail investors that want to participate in the Internet," said Tonia Pankopf, an analyst with Merrill Lynch. "They want a piece of something they see as an enormous opportunity."
The broader market was mixed as traders kept one eye on a $41 billion aid package for Brazil and the other on a looming US air strike against Iraq. The Wired Index shed 0.93 points to close at 419.66, while the Dow Jones Industrial Average ended 89.85 higher at 8919.59. The Nasdaq fell 3.08 to 1847.98, and the S&P 500 was up 8.03 at 1125.72.
The rationale for the massive, fiscally unjustified, thoroughly irrational run-ups in share prices is based solely on the hope that if one Net stock -- Amazon.com, say -- can hit pay dirt, well then, so can eBay (EBAY) or EarthWeb (EWBX), which both fell in late-afternoon trading following days of extraordinary gains.
And now we have theglobe.com, aspiring for a niche beside other build-your-own-page providers like GeoCities (GCTY) and Tripod, owned by Lycos (LCOS) (which recently acquired Wired Digital, the parent company of Wired News). Whether online communities end up being just another Internet flash in the pan -- remember push technology? -- or whether they settle in for the long haul beside money-churning portals, there's only one thing driving a stock like Theglobe.com, and that's pure, unadulterated speculation.
"It's the greater fool theory," said Les Childress, president of Childress Investment Research. "These companies aren't backed by revenues or fundamentals. There are some people buying and holding these stocks, trying to find the next Amazon. But what you're really seeing is people buying these stocks and hoping they can find someone else to buy them for more than they paid."
Reality check: Theglobe.com lost $11.5 million over the first nine months of the year. Can investors in the company really feel comfortable with a current market value of $621 million?
"Fifteen years ago," Childress observed, "everyone drove up biotech stocks, believing that someone out there would find a cure for cancer. Now look at the industry. Ninety-seven percent of these companies still aren't making any money."
Ah, but every so often the slot machine pays off. Web-site operator Go2Net (GNET) climbed $9.75, or 33 percent, to $39.75 after doing something totally out of left field: reporting a quarterly profit of 2 cents a share. Funny how investors go absolutely hog-wild when an Internet company actually pockets some cash -- like it was the last thing anyone ever expected.
With all this excitement surrounding the young pups, the Net's older dogs could only sit back and scratch. Yahoo (YHOO) fell $5.25 to $168, and Excite (XCIT) was down $2.94 at $49.44. America Online (AOL), with more than 14 million members and counting, lost $1 to $139.75.
Dell Computer (DELL) took a beating for failing to live up to the Street's whisper expectation in reporting its latest quarterly earnings. Although the company came through with profit of 28 cents a diluted share, a penny more than earlier consensus estimates, traders actually were looking for profit of 30 cents a share, causing disappointment. Several brokerages promptly downgraded Dell's stock. How's that for playing rough? Dell slid $5.25, or 7.6 percent, to $63.94.
IBM (IBM) felt some heat, slipping 44 cents to $157.44, while Intel (INTC) was $1.06 higher at $103.75. Microsoft (MSFT) rose $1.25 to $110, and Cisco Systems (CSCO) was down 50 cents at $64.69.
FDX (FDX) turned things around, advancing $1.13 to $54 after Federal Express pilots placed new concessions on the table in their bitter wage negotiations with management. Nevertheless, FedEx continued playing hardball with the pilots, who have threatened to strike during the busy holiday season. The company insisted that any new proposals be presented in writing and withdrew its most recent settlement offer.
Lam Research (LRCX), a maker of semiconductor gear, fell 25 cents to $16.69 after handing pink slips to about 500 employees, or 15 percent of its workforce. The company had said it would be tightening its belt as part of cost-cutting moves.
And then there's good old K-tel International (KTEL), which dropped $8.25, or 29 percent, to $19.75 after reporting a quarterly loss of 37 cents a share. This undoubtedly came as a shock to investors who pushed up the music company's stock about 150 percent this week for no better reason than because it had cut a few Internet deals.
An Internet presence, no profit -- hey, isn't that enough? Man, there's no pleasing some people.
