*Extra* The Plot Thickens as Wall Street Plays Its Games With IDT/Net2Phone

Don't forget to check out this morning's regular installment of Herb on TheStreet.

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Yesterday was the first day that analysts of the three firms that took Net2Phone (NTOP Quote) public could recommend the stock. Not surprisingly, all of them recommended the stock, and at midday Wednesday the stock had accordingly put in a 66% gain over three days. (Monday's gain came amid rumors the analysts would recommend the stock.)

Just one problem: IDT (IDTC Quote) (yes, that IDT, the telecommunications company that's no stranger to this column) owns 27.2 million shares, or 57%, of Net2Phone. So, something the analysts didn't tell you (tsk, tsk): If you really want to own Net2Phone, you should buy IDT -- assuming, of course, you think IDT is worth owning. (Go back and read this column's previous coverage, do some additional homework, scan through the cultlike postings on the IDT message boards and make your own decision on IDT as an investment!)

Put another way, 0.77 Net2Phone share underlies every IDT share. That means if you believe Net2Phone is worth, say, 58, then IDT is worth around 45.

But, hey, before you go rushing out to buy IDT as a proxy for Net2Phone, you might want to familiarize yourself with dELiA*s (DLIA Quote) and its Internet spinoff, iTurf (TURF Quote), and Ziff-Davis (ZD Quote) and its Internet spinoff, ZDNet (ZDZ Quote). In both cases, Wall Street initially bid up the parent and the spinoff. Then investors in the spinoff realized what fools they were and the stocks of both collapsed.

As I write this, Net2Phone is trading at 62. Does anybody care that the analyst for Deutsche Banc Alex. Brown -- an underwriter on the deal -- initiated coverage with a fourth-quarter 2000 price target of 50 to 52? Apparently not, because in the last two days, the number of shares outstanding of Net2Phone has been bought and sold four times. (Calling P.T. Barnum!)

And while we're on the topic: Anybody ever use Net2Phone's service, which allows you to place a call through your PC over the Internet to another telephone, using a microphone on the PC as a mouthpiece? I have a friend who has the service. Each time he calls using it -- I swear! -- I can't ever understand a word he's saying. And he uses a T-1 line! Imagine what it must sound like over a regular phone line.