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Chapter 7 - The Secondary, February 3 - March 28, 2000 - Episode 4
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TODAY'S MARKETS
Big Router Leads Some Technologies LowerBy PETER SCOTTSON
THE broad STREET JOURNAL ONLINE
February 3, 2000 5:02 p.m.
Big Router closed down 4 3/8 at 147 today after an early morning influx of sell orders. The market bell-weather was down as much as 7 1/2 points in the early afternoon but recovered towards the close. Volume was almost double the typical daily average. The stock is showing some weakness in high volume in after hours trading. The last trade reported was at 146.
Some market participants dismissed the Big Router weakness as a necessary correction after a long run up. Harold Jones, an analyst at FCBC, says that any dips are a good opportunity to accumulate this strong stock. The company says it has made no significant announcements today that would explain this market activity. The company, citing its policy of never commenting on rumors, declined to comment on rumors that its growth for the first quarter may be below the whisper number.
Other router stocks also declined, apparently in sympathy with the move in Big Router. EverFast was down 2 1/8 to 172, and PacketWarp dipped slightly during the day although it closed unchanged.
Antihack and hackoff.com, the two leading providers of hacker protection to e‑commerce sites, both filed with the SEC for secondary offerings today.
Antihack plans to offer four million shares of common stock and approximately 100 million in debt securities convertible into common. Two million antihack shares will be offered by the company and two million by selling stockholders including the founders, officers, and venture firms. Antihack was up as much as 7/8 to an all-time high of 57 ¾ on moderate volume at the close and prior to its announcement. The stock is slightly down on moderate volume in after hours trading. First Boston is the lead underwriter for both the antihack equity and debt transactions.
Hackoff.com is offering three million shares of its common, two million of which will come from selling shareholders and one million from the company. The company has been off its highs earlier in the session and closed sharply lower, down 18 1/8 to 135 7/8 on heavy volume. It has recovered slightly to 137 on light volume in after hours trading. Barcourt Brother is the lead underwriter for hackoff.com.
“What the fuck happened?”
Larry and Donna are in Larry’s office on a conference call with Harvey Maklin and Sam Gutfreund from their respective offices at Barcourt & Brotherson. Larry is pacing back and forth between the table with the Polycom on it and his desk where he can watch hackoff shares trade in the aftermarket.
“Larry, stocks always fall on the announcement of a secondary, we told you that,” says Harvey Maklin. “This is nothing unusual. You’re trading where you traded a week ago. We don’t think this is a bad reaction.”
“It didn’t have to be this bad,” says Larry. “You guys were just asleep at the fucking switch. I was watching. Some big sell orders came up — that was no surprise — and where was your fucking trading desk? You’re supposed to be our market-makers but you weren’t there with a bid. All of a sudden Barcourt disappears. And the stock falls like a fucking rock. I can see what’s going on.”
“We got hit like everyone else with an avalanche of orders,” says Sam. “They took out all our bids before we could repost them.”
“You mean you didn’t want to risk any of Barcourt’s precious capital doing your job even after all the money you’ve made on us,” says Larry.
“It would have been better if the filing was made after the market closed,” says Sam. “Not to make an excuse but we could have handled it better then. Better chance for the information to get absorbed.”
“Your fucking lawyers told us we had to let the filing go when the rumors hit,” says Larry. “Now you’re telling me everything would have been fine if we waited a couple of hours like we wanted to?”
“No, it’s just too bad the rumor got out,” says Sam. “You did what you had to do. We did what we had to do. But we don’t catch falling knives.”
“Now we’re a fucking falling knife! A minute ago Harvey says not a bad reaction and you call us a falling knife. Which is it, guys?”
“Taken as a whole,” says Harvey, “this wasn’t bad. The stock’s not at a bad place. It’s still at nine times the IPO, which is a strong place to start a secondary. Investors may be a little spooked by how much stock is coming from selling stockholders, but I think we’ll be okay.”
“Now you’re throwing that back in my face,” says Larry. “This morning you tell me that you can handle two-thirds/one-third and now it’s our fault the stock is down.”
“We advised half-and-half,” says Harvey. He is smiling but he’s alone in his office so no one can see that.
“Another thing,” says Larry. “Fucking-piece-of-shit antihack isn’t even really down, and they announced their secondary. How come they don’t ‘have a natural reaction’?”
“Investors may like the debt portion of their offer,” says Harvey. “We would have been happy to do a convertible for hackoff. We told you that.”
“Yeah,” says Larry. “You would have been happy with the commission, you mean. We don’t need to borrow the money. Look, I don’t have more time to spend on this call. Let me tell you what I expect: One: the fucking trading desk has to wake up. We need our market-maker to support us. I’ll be watching the trading and I expect support even if Barcourt has to risk some of its own money. Two: the guy you’ve got replacing Gustav as our senior banker for the roadshow sucks. We did a run-through with him and he apologized for being alive. No fucking way we’re going on the road with him. Get Gustav back or get someone better. Three: I’m gonna be watching how First Boston does supporting antihack. I expect you guys to do better. Should be easy; you’ve got a better product to sell. Harvey, you with me?”
“We’ll do the best we can,” says Harvey. “I have some ideas on someone else for senior banker; I’ll get back to you tonight — tomorrow latest.”
“Sam?” prompts Larry.
“Can’t predict the market,” says Sam. “I wish you guys luck.”
“So that’s why I called,” says Larry to Donna after Sam and Harvey hang up.
“You called because you can’t stand to see the stock go down,” says Donna. “I told you they wouldn’t promise to support it. Gutfreund didn’t even say he’ll try.”
“He’ll try,” says Larry. “He’s a good poker player and he has more balls than Maklin but he knows he fucked up or his guy fucked up and it was important that he know that I know. Just like when a player argues with the ump, right? That call isn’t going to be changed but maybe the ump gives the guy a break on the next call to make up for it. And I got them replace that pathetic kid they sent.”
“Whatever,” says Donna.
“You have a problem?” asks Larry. “You should be happy. I fought like hell for your shares. Everyone gave up something except you.”
“I thought we’d be in the shoe,” says Donna. “We were talking about initial allocation. Everyone knows that the shoe is on top of that. And you took the whole management part of the shoe.”
“Jesus,” says Larry. “How ungrateful can you be? I had to give up part of my initial allocation; I had to deal with Big-fucking-Router that now decides it’s a VC firm and, oh yeah — Joanne, who doesn’t think you’re worth 100K shares — and now YOU’RE giving me shit?”
“I’ve got to buy some clothes for the roadshow,” says Donna. “See you tomorrow.”
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