SAN FRANCISCO --- Strangely, strong corporate earnings begot selling today. Predictably, selling begot more selling and major averages bled recent profits, most notably in technology. (For more, see today's
The Ronald Reagan IPO
You wouldn't have known today was such a rough day judging by IPOs, notably
, which soared 256%.
After the close,
offering of 12.3 million shares priced at $28 per. This after underwriters -- led by
Credit Suisse First Boston
and Frank "Duke of the Net(?)" Quattrone -- upped the expected price to $24 to $26 today vs. $16 to $18
last week and $9 to $11 originally. (Did somebody say "inflation"?)
"It's phenomenal," said Steve Harmon, senior investment analyst at
. "The interesting thing is they haven't figured out their business model. The most important thing MP3.com has is traffic centered around music
but I don't think they can survive as a college-student free-for-all." (Having survived some, I can't tell you it ain't easy, especially on the liver.)
The company will need "meaningful deals" to expand from its current offerings, mainly "garage bands" and better-known artists who have been "reamed" by the music industry, Harmon said.
This will be paramount for the coming competition he foresees with other online music purveyors, notably
, which recently announced it will offer downloadable music.
"MP3.com is a Teflon-coated IPO, but with
on CDNow's team, MP3.com better line up some serious players on the entertainment side," the analyst said.
"You have to be careful as an investor as you look at MP3.com," Harmon continued. "It's as if
wanted to aggregate unknown writers and sell a compilation of their stories. How exciting a business model is that?
MP3.com hasn't been able to monetize the traffic of their artists yet."
Harmon recalls asking MP3.com Chairman and CEO Michael Robertson (who owns over 25.6 million of the company's 53.3 million outstanding common shares, according to the firm's amended S-1 filing of July 14) about the company's "sell-through rate" at a recent conference.
"He said 'I don't have the stats,'" Harmon recalled. "It didn't sound quite right. Anybody in business, they're checking sales every 25 minutes. Basically it sounds like there's not any sales. People don't want to buy unknown artists, it's a fundamental flaw."
According to the S-1, MP3.com had net revenue of $1.1 million from March 17, 1998, through Dec. 31 and a gross profit of $947,480.
Robertson could not be reached for comment but a spokesman promised to try to arrange an interview once "legal" clears it, leaving me feeling like a young
(who I bet rues the day he left San Francisco for the apple in decay).
Despite that and a belief naming a company after a technology is a bad idea, Harmon said MP3.com will "be one of the better-performing stocks in the aftermarket this year" and could trade north of $100 tomorrow.
For more on MP3.com, see today's
As a member of
markets team (and one who thinks it's the best in the biz -- online, offline or conga line), it's hard for me to be objective about our offerings. With that disclaimer, Senior Writer
Selloff Signals a Good Time for a Summer Break From Stocks gets the nod today for its simple (but not simplistic) and pithy analysis of the action.
The Carnage, the Carnage
Today's action provided little solace for those long. But Ronny Kraft, CEO of
Gotham Capital Management
, was downright giddy.
"I think the high has been put in," said Kraft (also quoted in the aforementioned Lahart feature). "Today was huge. I took a bunch of shorts the middle of last week and was sweating my ass off. A day like today makes you whole."
Specifically, the hedge fund manager shorted Amazon.com at 134 last week. Other shorts include
at 99 7/16 and
Simultaneously, Kraft has shed some long-held long positions in his roughly $55 million fund, including
Fox Entertainment Group
"We'll probably rally at some point; I think the market is not going to go straight down," he said. "You're going to have idiots trying to hop in tomorrow thinking the day-and-a-half correction is over."
Kraft reiterated a long-standing belief inflation is the greatest risk, noting futures prices on various commodities jumped an average 7% in the past month. "Growth's tradeoff is inflation," he said. "You couldn't make that case in the last three years, but Japan and the Pacific Rim are coming back, wallets are open, pricing power is there."
That settles it, I'm doubling the fee to read this column.
For the gamblers in the house (bet, bet, bet, bet, bet), lay big money
Rick Santelli's days on
are numbered unless he changes his
. I have no facts to back that up, it's just a hunch.
It just seems he's getting less and less time on "Squawk Box" and
Mark Haines is less and less eager to interact. (The cold shoulder?)
That, of course, is a shame because -- as he joined
last month after a career as a trader with
in Chicago -- Santelli actually knows what he's talking about, even if he's a bit bearish. He's just got a technical bent (and futures are confusing enough as it is) so I can't imagine he appeals much to "the masses."
And on TV, that's what it's all about.
wrote an excellent piece
yesterday that dealt with how journalists view peers who become financial pros. I wonder how Santelli's former company-workers and other traders view him -- hero, traitor or fool?
Aaron L. Task writes daily for TheStreet.com. 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. He welcomes your feedback at