THE MARKET MIDDAY
DJIA 10853.34 +53.50 (+0.50%) S&P 500 1331.49 +3.74 (+0.28%) Nasdaq 2504.24 +25.90 (+1.05%) Russell 2000 443.93 +1.60 (+0.36%) 30-Year Bond 90 15/32 +12/32 5.94 Yield
TheStreet.com (Nasdaq: TSCM) accelerated $3 5/8 to $33 3/16 this morning after at least three firms initiated coverage with positive ratings. Should it surprise anyone that coverage for this company intensified this morning? Absolutely not. The company's initial public offering (IPO) started trading on May 11th. Securities regulations require underwriters of an IPO to wait 25 days after an offering to begin publicly making comments. And how many days are between May 11th and June 7th? That would be 27. (Day 25 would have been a Saturday, and although many analysts work over weekends, they don't spew out research until the next business day.)
For the record, two of the main IPO underwriters, Goldman Sachs and Hambrecht & Quist, started coverage a notch below their top rating. Goldman used the "market outperform" moniker, a step under its "recommended list," whereas Hambrecht classified TheStreet as a "buy," but didn't put the company on its "focus list." What information can be gleaned from these ratings? Nothing really, beside the fact that the investment banks are fulfilling their duty of "supporting" the stock after its offering.
In return for the hefty fees that TheStreet paid these firms to manage the IPO, Wall Street firms are expected to provide coverage of the stocks. Considering that those fees run into the millions of dollars, very rarely does that initial report start out with a negative slant. While Wall Street initiation reports might contain valuable fundamental information about a company's operations and future plans, you should not let the rating sway your investment decision. They are investment opinions that have in essence been bought by the company.
Can you give any more credence to SG Cowen, which also started TheStreet with a "buy" rating this morning but wasn't one of the company's underwriters? Potentially, but then you have to be concerned that Cowen is trying to position itself for a piece of TheStreet's next offering. It missed out the first time, but as a staunch supporter of the stock it might be selected in the next go-around. Perhaps I'm too cynical about Wall Street analyst coverage, but with all the conflicts of interest between the analyst community and us, being overly skeptical is probably healthy.
Financial services firm First Security Corp. (Nasdaq: FSCO) jumped $6 1/8 to $24 3/4 after Salt Lake City-based bank holding company Zions Bancorporation (Nasdaq: ZION) said it will pony up about $5.9 billion in stock to acquire the company. Zions, which will adopt the First Security name, slipped $6 1/8 to $59 1/4 this morning. Zions expects the deal to add 10% to its fiscal 2000 earnings and 14% the following year.
Aerospace and auto parts conglomerate AlliedSignal (NYSE: ALD) rose $4 7/16 to $62 13/16 this morning after announcing that it will join forces with aerospace and industrial controls firm Honeywell (NYSE: HON) in a merger valued at about $15.5 billion in stock and assumed debt. Honeywell, which will lend its corporate name to the new entity, picked up $7 13/16 to $112 13/16. For a closer look at the deal, see today's Breakfast With the Fool.
Cable-based Internet access provider High Speed Access Corp. (Nasdaq: HSAC) added another $3 to $23 3/8 after rising 57% on Friday in its first day of trading following its initial public offering of 13 million shares at a price of $13 per share.
Chip enhancement technologies developer Rambus (Nasdaq: RMBS) gained $7 to $79 7/8 thanks to a Morgan Stanley Dean Witter upgrade to "strong buy" from "outperform." Analyst Mark Edelstone set a 12-month price target for the company of $150 per share.
Natural gas firm Columbia Energy Group (NYSE: CG) ignited for a $6 3/8 gain to $62 1/8 after natural gas, water, and electricity distribution company NiSource (NYSE: NI) offered to buy Columbia for $5.7 billion, or $68 per share in cash. The offer comes less than a month after Columbia's unsolicited bid for Pittsburgh's Consolidated Natural Gas Co. (NYSE: CNG) fell through.
Strip mall real estate investment trust Burnham Pacific Properties (NYSE: BPP) moved up $1 3/8 to $12 1/2 after a real estate investment group led by Value City Department Stores (NYSE: VCD) chairman Jay Schottenstein disclosed in a federal filing an offer to acquire the REIT for $13 per share in cash. Schottenstein's group already holds an 8.2% stake in Burnham, according to the filing.
Less-than-truckload and partial-truckload freight carrier Jevic Transportation (Nasdaq: JEVC) rolled $2 15/16 higher to $13 11/16 after agreeing to be acquired by fellow trucking company Yellow Corp. (Nasdaq: YELL) for $14 per share, or $200 million including assumed debt. Yellow stalled $3/16 to $17 5/16 on the news.
Healthcare information services company IMS Health (NYSE: RX) tacked on $2 5/16 to $30 1/8 after Adams, Harkness & Hill raised its rating on the firm to "trading buy" from "accumulate."
Mydiscountbroker.com owner Southwest Securities (NYSE: SWS) advanced $3 7/8 to $58 after saying it will acquire privately held ASBI Holdings, the holding company of thrift First Savings Bank FSB of Arlington, Texas, for 2.6 million shares, or about $141 million based on Friday's closing price.
Electronic design automation (EDA) technologies firm Synopsys (Nasdaq: SNPS) climbed $2 3/16 to $45 13/16 after announcing a $200 million stock repurchase plan after Friday's close.
Internet investment firm CMGI Inc. (Nasdaq: CMGI) rose $7 1/8 to $101 3/8 on news that software giant Microsoft (Nasdaq: MSFT) and PC direct marketer Dell Computer (Nasdaq: DELL) will take respective 4.4% and 4.9% stakes in NaviSite, CMGI's majority-owned Internet application services and Web-hosting company. <
Credit card lender Providian Financial Corp. (NYSE: PVN) lost $3/16 to $78 1/4. The law firm of Wolf Popper LLP filed a class action suit against the company alleging securities fraud, something that's dogged the company in recent sessions. Providian said in a release Friday night that while it hadn't seen the lawsuit, "we can say that the allegations made by the plaintiff's firm [in a Friday press release]... are absolutely without merit. The company intends to defend itself vigorously against these claims."
United Airlines operator UAL Corp. (NYSE: UAL) descended $1 9/16 to $64 1/4 on Friday night's news that the company said May revenue passenger miles fell 1.3% from last year's levels. "Revenue performance for the second quarter and full year 1999 will be below our original expectations,'' said COO Jim Goodwin. Q2 EPS is seen between $2.40 and $2.80, well off IBES' $3.08 consensus projection.
Elsewhere on the tarmac, Northwest Airlines Corp. (Nasdaq: NWAC) moved back $1 3/8 to $31 1/4 on this weekend's news that the company's flight attendants' union voted to strike. According to Reuters, only 49 of the 8,735 votes cast were against a work stoppage. The flight attendants have been in contract talks with the airline for nearly three years.
Financial services software maker Interlinq Software (Nasdaq: INLQ) lost $1 to $6 3/4 on news that it cancelled plans to be taken private by one of its shareholders, San Francisco-based investment firm W.R. Hambrecht + Co. Interlinq isn't liable for any break-up fees beyond out-of-pocket expenses.
Data communications and enterprise networking company Network Access Solutions (Nasdaq: NASC) fell $1 1/16 to $11 in its second day of trading. The company sold 7.5 million shares of stock to the public for $12 each.
The American depositary shares of steel maker British Steel PLC (NYSE: BST) rusted $1 3/4 to $24 this morning. The company announced plans to buy a 62% share in Dutch metals producer Koninklijke Hoogovens NV for $6.5 billion.
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