The Analyst Brain Drain Hits H&Q

This column was originally published at 10:15 p.m. Thursday, but it was updated with new information from the company press release Friday morning.

Danny Rimer, the noted Internet analyst for soon-to-be-acquired investment bank Hambrecht & Quist (HQ), is leaving the firm to be a venture capitalist. He's set to join The Barksdale Group, the Menlo Park, Calif., VC outfit set up earlier this year by three former Netscape Communications executives, including former CEO James Barksdale and Peter Currie, Netscape's longtime chief financial officer, according to a hastily issued news release from H&Q and Barksdale.

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Though only 29, Rimer is considered an Internet-industry veteran, and he's indeed been a pioneer in "getting" the Internet as an analyst for H&Q, where he's worked since 1994. Rimer is not necessarily known as a stock-picker, at least no more so than any Internet-stock analyst. A perusal of his reports at the H&Q Web site reveals solo coverage for a smattering of companies, all which merit buy recommendations from Rimer. These include Critical Path (CPTH), AskJeeves (ASKJ) and Marimba(MRBA), all companies Rimer and H&Q helped take public.

What Rimer is known for is his role as a keen talent scout, able to get H&Q in the door with promising IPO prospects, and the kind of analyst who can convince institutional-investor clients to invest in and stick with a banking client. This should serve him well as an investor. Indeed, H&Q and Chase Capital Partners -- whose parent, Chase Manhattan (CMB), is buying H&Q -- are investing in the Barksdale Group. Rimer intends to become an advisory director of H&Q, which he won't officially leave until year-end. (TheStreet.com (TSCM:Nasdaq), publisher of this Web site, has received financial backing from Chase unit Chase Capital Partners.)

Rimer was traveling Thursday and unavailable for comment, but upon learning that TheStreet.com intended to publish news of his departure Thursday night, the two organizations issued their release this morning. H&Q earlier in the week announced the move internally, but the firm had waited on a formal announcement because Rimer had not had an opportunity to communicate with the companies he follows. Analysts typically like to notify corporate clients about their departure before the public gets the word in order to assure them the bank will continue to cover the client's stock. As of Thursday, at least one prominent H&Q client whose company Rimer took public hadn't heard of the move. H&Q also is hosting a conference in New York on Nov. 15 for companies it has taken public this year to tell their stories to investors. A fair number of the presenting companies will be Rimer's clients.

A busy man, Rimer has written for online news site news.com and is a regular columnist for The Industry Standard, the Internet-business trade publication. He's also holds the ceremonial post of High Commissioner for Economic Development of his native canton of Geneva.

By leaving H&Q at the height of his prestige within the firm, Rimer is the latest in a lengthening line of research analysts to skip out on their grueling jobs for the relatively serene life of a venture capitalist. Among the analysts-turned-financiers, all of whom covered the Internet industry before bolting to invest in it, are Benchmark Capital's William Gurley, whose last job as an analyst was with Deutsche Morgan Grenfell; William Burnham of Softbank Capital Partners, whose previous hop was to Credit Suisse First Boston; and Keith Benjamin, who recently joined Highland Capital Partners after ditching Robertson Stephens. Within San Francisco-based H&Q, Rimer also is following in the footsteps of one of the original Internet analysts, "Surreal" Neil Weintraut, who gave up his prominence at H&Q for the relative obscurity of 21st Century Internet Venture Partners. (Softbank is also an investor in TheStreet.com Inc.)

Will the last sell-side Internet analyst please turn out the lights?

Resource for Unlocking Lockup Information

Many of you have written to say you appreciate being clued in to the lockup expiration game. That's the well-known phenomenon where stocks fall just before the end of the typical 180-day period following an IPO during which insiders can't sell their shares. Whether or not insiders dump their positions, the perception of increased supply often is enough to depress a stock, at least for a few days around the lockup expiration, as detailed here Monday.

A handful of questions arose. First, the lockup period is subject to the discretion of the lead underwriter, and in most cases, the underwriter reserves the right to release the insiders from their lockup before the waiting period is up. That's why you can't always rely only on dates and must read the S-1 registration statement to see what provisions the underwriters have attached. Every IPO prospectus has a detailed section on lockup periods. A literal-minded reader wanted to know if it's six months or 180 days. It's typically the latter, but note that 180 days is merely a custom. eBay's (EBAY) lockup period, for example, was 120 days, and the stock charged right through the big bad event.

Most readers who wrote wanted to know of a handy-dandy resource for monitoring companies whose lockups are about to expire. I wanted to know, too. So I called TSC's resident IPO maven, Beth Kwon, who referred me to her favorite site, operated by Edgar Online (EDGR) (which, proving that not all lockups are created equal, has a 365-day lockup period). Edgar Online maintains one calendar for lockups and another for waiting periods, the period after an IPO during which underwriters will not publish research. Some investors like to follow the latter list because stocks sometimes run up in anticipation of a bullish recommendation by a sycophantic analyst. Beth warns me that Edgar Online's data aren't perfect. If you're going to play this game, always check the S-1 yourself. Furthermore, check to see if the company has altered its situation by getting an early release or entering into a deal that would have changed the schedule.

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