Theglobe.com Soars On Split
Shares of Theglobe.com surged 34 percent Friday to an all-time high after the publisher of Web community sites set a stock split that was seen as an unusual move considering the stock's market price.
"It's a little bit surprising when a company splits before it hits the century mark," said Rob Martin, an Internet analyst at Friedman, Billings, Ramsey.
Theglobe.com's stock rocketed 19 15/16 to 78 15/16, its highest level since coming public last November. The New York-based company declared a 2-for-1 split after the market closed Thursday.
Theglobe.com has 10.7 million shares outstanding, bringing its market value to about $845 million. The company lost $4.5 million on sales of $2.8 million in the fourth quarter last year and had 9.3 million unique users in December. The company expects to report first-quarter results in the first week of May.
The company raised $22.9 million when it went public in mid-November at $9 a share. The stock immediately shot up 900 percent to 90 on its first day of trading. By the following day the stock traded at 63 1/2.
"Given the run-up in stock values that have occurred solely due to a stock split - it's not surprising that a company would choose that for increasing the value," said Stephen Hall at venture capital firm Prospect Street Ventures. "In this case it seems a bit pre-mature before a triple-digit stock price. Certainly it's a way to draw attention."
"The stock split phenomenon goes on," said Cathrine Skelly, BlueStone Capital Partners. "But stock splits are often initiated to enable smaller investors to get in. At this price, the stock's not really prohibitive."
"I think it's an attempt for the company to stay in the press and be viewed as a hot Internet company, partly because their goal is to be acquired," Skelly added.
While declining to comment on whether the company has been approached or in discussions to be acquired, Esther Lowy, a spokesperson at Theglobe.com defended the timing of the decision as "not out of the ordinary at all."
Indeed, many companies announce splits before reaching a $100 stock price, but that's not the case with Internet firms, observed James Hale of The Online Investor.
"This could be a risky move given that the sector is so volatile. After the split, the stock won't have as much cushion on the downside."
Lowy also dismissed the notion the stock split timing was a publicity stunt. "We've been announcing very real deals, from acquisitions to partnerships, and we deserve our press coverage," she added.
"We do want to make the stock more attractive to individual investors," said Lowy. "There are things in the works. We've always said we're aggressively pursuing strategic initiatives, including making more acquisitions in the e-commerce space."
Stock splits also occur to provide liquidity, which does not appear to be the motivation in this case, noted aalysts. Shares have also traded some 750,000 on average for the past thirty days, considered quite reasonable for a company with 3 million shares outstanding.
BlueStone's Skelly also observed that the timing "seems coincidental" given that rival Xoom.com is in the news.
Xoom.com, another Web community specialist, completed its secondary offering on Friday. The community site offered 4 million shares. Half of the shares are being sold by insiders, and 2 million new shares were sold at $66 per share With this offering, Xoom.com raises its cash balance to about $180 million. Skelly said having a high-cash balance makes them an attractive acquisition target in the future - a possibility she said is almost a certainty. Shares of Xoom.com fell 7 percent in recent trading.
Written By Bambi Francisco, CBS MarketWatch