As night fell on Thursday, Israel's hi-tech sector knew happiness again, after many dreary months. Verint Systems (Nasdaq:VRNT) broke through the ice coating the primary market, raising $72 million in an issue to the public, according to a company value of $370 million.

At first glance $370 million sounds unremarkable, after all the stories we've read about companies floating or being sold at multi-billion-dollar valuations. But look at your calendar. We're in 2002, not 1999. Today, $370 million is a ton of money.

How did Verint elbow onto Wall Street? Its prospectus offers no answers. It's just another hi-tech company, not particularly large or fast-growing. Like most of its Israeli peers it's still operating in the red. It ended 2001 with revenue of $130 million, an operating loss of $2.5 million and a net loss of $5 million. So how did it do the impossible?

It didn't. Its shareholders did.

Verint has a sugar daddy ¿ wealthy, powerful, and liquid. It has something only money can buy: plenty of contacts on the Street. Daddy is Comverse Technology (Nasdaq:CMVT) and its chairman, Kobi Alexander.

Verint's underwriters, led by Lehman Brothers, would otherwise probably have given it the cold shoulder. The allure is that pushing Verint to their customers improves the chance of handling a deal for Comverse in the future. Remember, for all the travails it had last year, Comverse is still a wealthy company with $1.8 billion in its till.

Evidence that Verint's price was inflated can be found in rival Nice Systems (Nasdaq:NICE). The two companies do roughly the same thing ¿ developing and selling digital recording equipment, customer service centers, and fast retrieval of voice and video for the defense and intelligence establishment. But Nice trades at a market value of $180 million, less than 50% above its annual sales volume. Verint hit the floor at almost three times its annual sales.

One man's success is another's tough luck

The American market didn't dawdle. It started to adjust the company's price a minute after trade in Verint shares began on Thursday. In three days the stock shrank by 25%. Investors to which the underwriters had sold the stock lost a quarter of their money.

Verint chief executive Danny Bodner has a slightly different view of the situation. On Sunday sources near the company said the issue is an outstanding success, given the tough market conditions. They are right: from the perspectives of Verint and Comverse, it was a phenomenal success. But was it also a success for investors?

Verint may yet surprise and justify its market valuation by breaking ahead, growing and shifting to profits. Anything is possible. But the chances of that happening aren't good. More importantly, if Verint hadn't been swamped with investment bankers looking out for it, it probably wouldn't have made it to Wall Street, let alone at that valuation.

Yet investors watching their investment shrinking by 25% have no right to complain.

Even if they claim that the underwriters beguiled them with fairy tales about Verint's growth potential in the aftermath of the September 11 attacks on the United States, or whatever, they should shut up.

Why? Because they've had infinite opportunity in the last two years to learn what happens when buying into the IPO of a technology company spouting red ink. If that wasn't lesson enough, they also had a chance to see how Wall Street analysts operate when pushing new public issues.

In case you missed it, check out the scandal of Merrill Lynch analysts recommending shares to their faithful clients, while scorning them as dogs, or crap, in private.

That behavior was not confined to Merrill Lynch, of course. Merrill Lynch's people stumbled into a particularly embarrassing probe, probably because they grew careless and got caught. But almost all America's investment banks doctored their analyses in order to push overpriced goods to investors.

After two years in which investors lost trillions in tech stocks, and a year of investigations and lawsuits and hair-raising accounts of malfeasance regarding IPOs, nobody has the right to complain that they've been misled.

Anybody who bought Verint shares can either wait patiently for the company to forge ahead and justify its IPO price, or sell the shares at a 25% loss. But in any case, investors should zip their lips. They shouldn't splash the news that they learned absolutely nothing over the last two years.