Do the Math

The stories circulating over the Fortress Investment Group (FIG-NYSE) IPO remind us of the furor over the Netscape IPO. It would seem everyone on Wall Street is watching this deal all along their Watchtowers.

In July of 1995 I placed a courtesy call to the underwriters of the Netscape deal to snag a seat at the lunch as the circus made its way through New York City...dealing with the gatekeepers that control the velvet rope at these rubber chicken gatherings can be frustrating.

The roadshow was booked solid and I was told I could not attend..and this was two weeks ahead of pricing. Incredulous, I thanked Morgan Stanley for the love and hung up the phone. Of course, I deftly skirted the muscle at the roadshow door and stole someone’s precious seat at a table.

While the food was less than memorable, the deal put the internet on Wall Street’s map.

And the stock ripped:

On 14 November 1995 the Mountain View producer of Internet software announced a 2 for 1 stock split just 97 days after going public. That ranks among the fastest few dozen stock splits ever. Netscape’s management wasn’t just showboating: The stock was ripe for a split. It has soared spectacularly since its initial public offering at $28 per share on August 9, and last week it broke through $100. It closed at 96 ½. The split will cut the price by half, but shareholders will get an additional share for every one they hold, so the total value won’t change. Its stock trading was 242% premium to its initial public offering price. NeoMinds

Today’s stories of packed meetings are cute....but this time it is different. At least with the motivations of the managers hanging from the rafters.

Sure, some of those in attendance were looking for an allocation on the deal...they might even tuck it away in the hope it is the next new, new thing.

And others go to roadshows looking for a free lunch...it is one of the few the Street will ever provide.

But most of the managers in attendance were just comping the deal against their own business...in an effort to place a valuation on their own firm. Then they look at their stake and guesstimate their net worth...then they go to Bobby Van’s or other watering holes and chew it over.

We will take a rain check on Fortress...to us it is just another Castle Made of Sand.

But we do love America...Is this a great country or what?

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The content contained represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No position in the securities mentioned

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