TheStreet.com's DAILY BULLETIN
December 21, 1999
Market Data as of Close, 12/20/99:
o Dow Jones Industrial Average: 11,144.27 down 113.16, -1.01%
o Nasdaq Composite Index: 3,783.87 up 30.81, 0.82%
o S&P 500: 1,418.09 down 2.96, -0.21%
o TSC Internet: 1,098.75 down 14.34, -1.29%
o Russell 2000: 467.19 up 0.98, 0.21%
o 30-Year Treasury: 95 28/32 down 24/32, yield 6.428%
Companies in Today's Bulletin:
In Today's Bulletin:
o Online Brokers: OTS' Pending Decision Opens Door for E*Trade Bank Deal
o Wrong! Tactics and Strategies: Here We Go Again
o Evening Update: DoubleClick Splits and Viacom Divides in Evening Action
o Bond Focus: Bonds Pulverized, With Yields at 1999 Highs
Also on TheStreet.com:
Semiconductors: Analysts Applaud Conexant's Purchase of Maker
Conexant fell on the news, but the deal gives it a presence in the crucial ATM segment.
Internet: The Hard Sell: eBay Appeals to Its Top Auctioneers for Business
The online auctioneer reminds its 'power sellers' that there's still time to sell before Christmas.
Market Features: Fed Prognostication Centers on Whether Bias Will Survive
And whether, bias or no bias, monetary policymakers will dare to alarm the markets before the Y2K date change.
Internet: Intervu Surges on Microsoft Deal, but Payoff's Still Well Down the Road
The company gets a $1.7 billion market cap after selling a 2% stake to the software behemoth.
Online Brokers: OTS' Pending Decision Opens Door for E*Trade Bank Deal
12/20/99 6:53 PM ET
After more than six months of uneasy wrangling with regulators, it looks like
can relax a bit.
The Office of Thrift Supervision
, which regulates thrifts including Telebanc's
unit, said Monday that it finally has enough information to decide on E*Trade's acquisition of Telebanc. In the past, that has meant a positive decision is on its way, say four people in the thrift industry.
Investors took heart in the news to close the gap between E*Trade and Telebanc shares. They sold E*Trade and bought Telebanc shares, narrowing the spread between the two to about 7% of the deal's value. Just one month ago confidence was down and that spread was 30% off the deal's valuation. Under the deal's terms, Telebanc shareholders will receive 1.05 E*Trade shares for each Telebanc share.
It's unclear, however, what E*Trade had to do to get the OTS to consider the application complete. The agency doesn't comment on applications under consideration. E*Trade spokesman Patrick DiChiro didn't have any specific information on provisions made, saying that many of the OTS' questions were outlined in E*Trade's filing with the
Securities and Exchange Commission
The main delay in the deal, which was announced June 1, was
nearly 27% E*Trade stake. (Softbank America is the U.S. unit of Japanese venture capital firm
.) Softbank was unwilling to be regulated like a thrift and argued that it shouldn't be because it doesn't control E*Trade. But Softbank also has indicated that if the OTS didn't accept its views on this, it would decrease its stake to a level the OTS was comfortable with to get the deal through, according to E*Trade and Telebanc officials.
Months of paperwork as well as at least one meeting between the companies and the agency on this point delayed the decision past initial expectations for September. (
followed the deal's ups and downs.)
So even though Softbank's control of Telebanc has been a key issue -- even mentioned in Telebanc's proxy statement for shareholders -- there is no mention of it in Monday's press release. And this issue was nowhere to be found in any of the most recent correspondence between E*Trade and the OTS that was made public by the agency.
"I would suggest that there was some confidential submission by E*Trade that answers that question," says Matthew Lee, an activist with the
Inner City Press/Community On The Move
in New York, who has followed the case closely.
With the bulk of the battle now behind them, E*Trade and Telebanc face only a few more essentially procedural hurdles. For instance, Telebanc investors will vote on the merger during a Dec. 28 shareholder meeting.
In addition, E*Trade and Telebanc need their merger filing to be processed by the SEC. The SEC is reviewing both E*Trade's filing for new shares and Telebanc's proxy for disclosure.
In a joint statement Monday, E*Trade and Telebanc said they would continue working to get the agreement done as quickly as possible. What the release doesn't mention is the fact that the two companies' merger agreement expires at the end of the year. That fact cast a shadow over the stocks earlier this month when the companies said they might not get approval before 2000 and then refused to comment on extending the agreement beyond the end of the year. Now it seems it couldn't matter less.
The OTS is allowed up to 60 days to make a decision on the merger and often uses most of its time. But it could also decide within a few days. (On the long end, the OTS can extend its time period by 30 days if it needs to, or indefinitely if an issue of law or policy comes up.)
Whatever happens in the next 10 days at the OTS, when E*Trade toasts the year 2000, its glass will be at least half full.
Wrong! Tactics and Strategies: Here We Go Again
James J. Cramer
12/20/99 7:57 PM ET
Drumroll please! The next round of the
B2B rotisserie league -- the so-called supplemental draft -- is on tap and once again
and I need your help through your comments on our board. (I especially need your help as you know that Matt is killing me, mostly because of his super generous dollop of
Internet Capital Group
Join the discussion on
Cramer's Latest, and talk about the new
Same rules. Names get dropped in a hat. We have a mythical $500,000 additional to put to work on five new names. We bid on the names as they come up, and as always, we can pass for the next name.
There are two twists however. First, we are bringing back some of the stocks we red-shirted (
). Second, speaking of old football rules, we are throwing back three of our old picks to be drafted again. (Or, put another way, we are protecting seven exiting names and allowing three others to drift back to the pool.)
Last time your comments played a major role in which stocks we picked. Let's make it happen again.
owns none of these stocks. We have to learn them first through the Rotisserie League before we can play them in real life.
But we intend to be up to speed by Thursday when the supplemental draft occurs.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. Cramer's fund also may be long or short certain stocks in his B2B rotisserie league or Red Hot index. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at
Evening Update: DoubleClick Splits and Viacom Divides in Evening Action
12/20/99 8:30 PM ET
announced that it has set a 2-for-1 stock split.
said it plans to divide its online businesses into two groups as an initial step toward an IPO.
MTV Networks Online
would be separated into
, which includes Web site
, which would cover
Analyst see MTVi's IPO coming sometime early next year, but are not sure when the Nickelodeon site will make its public debut.
A handful of issues posted sizable gains in after-hours trading on
. The most active stock,
Juno Online Services
, rose 11 11/16, a big cherry on top of a big day-session gain of 77%. Lower on the list,
rose 2 5/8 after announcing its fourth quarter would meet or beat Wall Street expectations, citing its fiscal 2000 outlook as "favorable."
Rounding out the gainers was
, which jumped 13 13/16, more than the day-session gain of 10 3/8. All night long, CMGI rode on momentum, doubling a 5-point gain at 5 p.m. to a double-digit gain at 6 p.m.
nailed down the No. 5 spot on Island and No. 2 on
while racking up gains of more than a point on both ECNs. The surge in interest is likely due to the company's release of first-quarter earnings figures, which were 15 cents a share, 3 cents better than last year's quarter and a penny better than the
First Call/Thomson Financial
In other post-close news (earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified):
Mergers, acquisitions and joint ventures
said it is making plans to sell its financial services division
in order to fund its proposed $6.4 billion merger with
Consolidated Natural Gas
. Dominion said it has begun the search for "suitable buyers" but has not set any specific terms for the sale. The company said it does not anticipate selling the unit before completing its deal with Consolidated on Jan. 28.
Earnings/revenue reports and previews
said it expects to post a fourth-quarter loss between 35 cents to 39 cents a share as a result of charges. The 12-analyst estimate sees the company reporting fourth-quarter earnings of a 12-cent profit.
posted pro forma third-quarter earnings of 12 cents a share, beating the 14-analyst estimate of 10 cents and up from the year-ago 14-cent loss.
cautioned investors that it would cut its fourth-quarter earnings estimates by more than half, citing a drop in container shipping revenues and railroad congestion. The company said it sees fourth-quarter earnings to be between 18 and 24 cents a share, excluding one-time items. The disappointing earnings greatly miss the 10-analyst estimate of 53 cents a share.
said its same-store sales for the first 24 shopping days in the holiday season increased 5.8% from the year-ago report.
posted third-quarter earnings of 8 cents a share, beating the six-analyst estimate of 7 cents a share but down from the year-ago 10 cents.
posted first-quarter earnings of 15 cents a share, beating the 16-analyst estimate of 14 cents and up from the year-ago 12 cents.
reported second-quarter earnings of 88 cents a share, beating the single-analyst estimate of 83 cents but down from the year-ago 94 cents.
warned investors that it expects to post a fourth-quarter loss between 26 cents to 30 cents a share. The three-analyst estimate forecasts the company to report a loss of 25 cents.
Offerings and stock actions
said it set a 2-for-1 stock split, payable on Jan. 19 to shareholders of record Dec. 31.
said it set a 2-for-1 stock split.
said it would add 2.6 million shares to its current stock repurchasing program.
rolled out coverage of
with an intermediate accumulate, long-term buy rating and set a 12-month to 18-month price target of 300.
said it filed to throw out a patent infringement suit brought on by
, questioning if priceline owned the patent which is at the center of the proceedings. Expedia spokeswoman Suzi Levine said the company's filing questions whether priceline or its Chairman Jay Walker owns the patent.
Priceline's initial proceedings, which were filed in the U.S. District Court of Connecticut, claimed that Microsoft violated the state of Connecticut's
Unfair Trade Practices Act
and requested that the court uphold priceline's patent, prevent Microsoft from infringing on the patent and sought damages.
said it has tapped John Grainger as it new president and CEO. Grainger would replace James Bullock, who was asked to resign from his positions.
Bond Focus: Bonds Pulverized, With Yields at 1999 Highs
David A. Gaffen
12/20/99 4:25 PM ET
It was a
Blue Monday for the bond market, which didn't need any specific news to send prices tumbling, leaving yields at their 1999 highs across the entire yield curve.
The entire year's been a terrible one for bonds, but judging by the last several sessions, the market looks to have saved the worst for last.
Technically motivated selling and a lack of committed buyers doomed the market in the afternoon after a mostly middling morning, one day before the
meets for the final time this year. The Fed's not expected to change interest rates tomorrow, but there's a growing perception that the Fed will adopt a bias toward raising rates at the meeting, which indicates their concern about the pace of economic activity and the threat of inflation.
Lately, the 30-year Treasury bond was down 23/32 to 95 28/32, lifting the yield 7 basis points to 6.44%, its highest closing yield this year.
"There's nothing good about what's going on," said John Spinello, government securities strategist at
. "The levels are reasonable but the investors really aren't playing the investor game as far as we can see. They're not going to make a commitment to the Treasury market in last six days of trading" this year.
That lack of buying interest is the main reason why the market wasn't supported when it really began to get hammered in the early afternoon. There's very few investors willing to take on any risk when prices are plummeting and they're focused on preserving the year's gains -- that's like trying to climb up the wrong end of a slide.
Whatever investors are in the market were probably preoccupied with the sale of $3 billion in notes from
Morgan Stanley Dean Witter
. With Treasuries performing poorly, investors have been more interested in higher-yielding corporate paper, Spinello said.
Part of the recent selling is influenced by increased perception that the
Federal Open Market Committee
is going to move to a tightening bias tomorrow, which would indicate that the Fed is likely to raise rates at its Feb. 1-2 meeting.
"If we do get a tightening bias tomorrow, I won't be surprised to see the market trade a little better, in sort of a 'sell the rumor, buy the news' way," said Bill Hornbarger, fixed-income strategist at
There's one other wrinkle here: the Fed is reviewing the purpose of the bias, which has confused the markets on several occasions this year. The Fed had appointed a committee to evaluate the bias and what its future role should be, but it's unclear whether the Fed will make a statement discussing its findings.
The 10-year note closed at 6.35%, and the five-year note closed at 6.27%, highs for the year. The two-year note, trading on a "when-issued" basis (in advance of Wednesday's $15 billion two-year auction), was lately yielding 6.22%.
, in announcing the auction details last week, said if the two-year note yielded between 6.125% and 6.249% Wednesday, the auction would be considered a reopening of five-year notes sold in December 1996. At the time, the note was yielding 6.07%. Somewhat ironically, if the market tanks again tomorrow, this issue will be a new one after all -- but sold at a higher yield than that range.
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