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A Scan of the Filings (Try It at Home!) Unearths a Few Tidbits About E-Loan

The latest filing contains some interesting nuggets about the upcoming IPO. Plus: why you should care about disintermediation.

A fellow columnist recently chastised me for committing columny's cardinal sin,

revealing to readers a trick of the trade. In this case, I allowed that I had used a thesaurus to find synonyms for "plunge," "plummet" and the like. At the risk of further angering my cohort, here's another device grasped by too few investors in initial public offerings: the ability to use their word processors to compare and contrast amendments to IPO filings.

The tool is powerful, and it holds the key to unearthing tidbits about a company that has clammed up because of the "quiet period" surrounding its offering. For

Microsoft Word

users, simply cut and paste an IPO filing and its amendment into a Word file. Then click on "tools," then "track changes," and finally "compare documents." This will be old hat for the computer-savvy among us, but a revelation for the novice-to-intermediate crowd, of which I am one.

What you'll see, provided you have a color monitor, is a red line through the words that have been excised and a red line below the new stuff. Even without color the slashed and underlined portions tell the story.

Consider what comes to light by putting under the "track changes" microscope two documents from online mortgage broker

E-Loan

, which expects to go public shortly. Dublin, Calif.-based E-Loan first filed its IPO documents March 24. The first amended version landed at the

SEC

May 21.

The SEC encourages companies in registration to keep their traps shut, especially while regulators are reviewing the documents. But in E-Loan's case, the amendment reveals three noteworthy -- and unreported -- developments.

First, E-Loan discloses in the blandest of language that "immediately following" the IPO, an outfit called

Forum Holdings

will buy shares worth $12.5 million. It takes some digging, but a persistent investor could find out that Forum Holdings is the investment arm of

Group Arnault

, the financial plaything of billionaire Bernard Arnault, chairman of

LVMH Moet Hennessy Louis Vuitton

(LVMHY)

. Hmmm, that's interesting. Group Arnault also was a major

investor in

Datek Online Holdings'

recent round of financing, along with Paul Allen's

Vulcan Ventures

and another venture-capital firm.

E-Loan quietly put out a press release announcing a partnership with Group Arnault in Europe but didn't note the planned investment in E-Loan from Arnault, whose other recent Internet investments have included vitamin retailer

MotherNature.com

in Concord Farms, Mass.; London-based apparel retailer

Boo.com

; and

Libertysurf

, a free Internet service in Europe. Rest assured that when E-Loan begins its private roadshow meetings with institutional investors it will highlight the tie-in with Arnault, whose name doesn't appear once in the amended SEC filing.

Another tidbit from the new filing is that the day before E-Loan filed its first IPO document,

Softbank America

bought almost 1 million shares of E-Loan stock at $16 per share. Other entities of Softbank already held shares in E-Loan, and the purchase was disclosed in the first filing. But it was buried deep in the document, where it noted that the selling shareholders were E-Loan CEO Chris Larsen and President Janina Pawlowski. What's new is the specific date of the transaction -- just before IPO time -- and that existing shareholder Softbank actually paid more for its newest shares than E-Loan anticipates requesting from the public. The latest filing gave a projected price of $11 to $13 a share.

In the venture capital world, selling shares later for a lower price is known as a "down round" of funding and isn't generally seen as a good thing. Of course, nobody really expects E-Loan to sell its shares at $12 each, but if the market stays cool and the IPO price is in the $11 to $13 range, Softbank will have paid more than the big funds that buy in the IPO.

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E-Loan executives reached for comment Friday declined to discuss details in the filing, citing quiet-period restrictions.

Finally, there's this nugget underscored in red: E-Loan has established the E-Loan Foundation by granting it 75,000 shares, of which the charitable organization will sell 5,000 in the IPO. According to the filing, E-Loan staked the foundation in May and is using

Community Foundation Silicon Valley

to manage it. That's the same outfit that administers the suddenly well endowed

eBay Foundation

.

This last piece of information isn't likely to change the equation for any investor. But it's a good insight into how some Silicon Valley companies are planning to give it away before they even raise it.

Disintermediation, or 'How I Learned to Live with Jargon'

I suspect the word "disintermediation" elicits the same response from many of you that it does for me: My eyes glaze over (affectionately known in journalism as the MEGO effect). Every time one of the digerati says disintermediation, I fight the urge to snooze.

Gotta get over it. You don't have to like the highfalutin' word, and you don't have to use it. But you must understand it. That's because disintermediation -- the removal of intermediaries like bricks-and-mortar merchants and trucks-and-printing-presses publishers -- is simultaneously the most creative and destructive force affecting your job and your investments.

Here are two quick examples:

When

Fortune

magazine signed me up as a contributing columnist, they hired a really nifty photographer to shoot my mug shot. He spent loads of time with me, took scads of photos and sent the film across the country, where

Fortune's

art department produced the computer-enhanced portrait that runs in the magazine every month.

Now, when I joined

TheStreet.com

, editor-at-large and jack-of-all-trades Cory Johnson snapped a few pictures with a digital camera and zapped the digitized image you see above to New York. Consider the price difference in labor, equipment and material. Never mind the huge convenience.

I bought a snazzy

Palm V

last week from

Egghead.com

(EGGS)

for $362.79 plus $14.99 for shipping. For weeks

Buy.com

has been advertising a cheaper price, currently $342.95, but the gizmos are marked "pre/special order," so I clicked quickly to Egghead, which promises it has the product in stock.

Now comes the Sunday paper with a pullout ad from

Circuit City

(CC) - Get Chemours Co. Report

advertising the Palm V for $449. California's 8.25% tax would be more than double what I'm paying Egghead to deliver to my home in two business days.

Can Egghead make money with a sticker price 19% below Circuit City's? Can Buy.com make a go of it by not stocking products for which it advertises low, low prices?

Eliminating what pre-politically-correct corporate America called the "middleman" is a force that can't be stopped. How exactly it all ends up when the dis- and re-intermediating is done is anybody's guess.

Adam Lashinsky's column appears Mondays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a monthly column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

alashinsky@thestreet.com.