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Hudson City Bancorp, Inc. Message Board

  • corvette_kid1 corvette_kid1 Apr 12, 2000 5:48 PM Flag

    I posted this on some internet stock...


    boards today. Since it expounds on my previous
    HCBK posts on "New Economy" vs. "Old Economy", I
    thought I would post it here. Plus, some HCBK holders are
    surely 'Net/Tech investors or considering wading


    First, let
    me state that in the interest of full disclouser I
    am long this stock at a higher level. Not much
    higher, but I am underwater. I thought I bought in at a
    good level, but I forgot to take into account what I
    am about to write.

    In years past, a stock was
    IPO'd at $10. It had earnings and cash flow. On the
    open, it might pop 20-50%, depending on how hot it was.
    A year later it might be at $20. 2 or 3 years
    later, it might be at $30 or even $50. A triple or
    quintuple counts as a grand slam in investing

    Most of the stock was freely traded for these "old
    IPOs." Insiders could dump pretty much whatever they
    wanted, subject to Rule 144 regs. Because the float was
    larger in the first place (supported by earnings and
    cash flow), the stock was NOT affected by and insider
    selling. Supply and demand were already in balance, a
    balance determined by the earnings and cash

    With 'Net/Tech stocks, a new paradigm came into being.
    Stock was restricted on the IPO to a fraction of
    previous IPOs. Floats of 5-15% of total shares was not
    uncommon. With supply severly restricted, IPO's flew -- up
    3-fold, 5 fold, 10 fold -- from pre-IPO talk. Stocks were
    up 10 or 20 fold from the IPO price or what was the
    pre-IPO price (if the underwriteres were smart enought to
    raise the price at the last minute and get the company
    more cash).

    Fast forward a few months or a
    year. Lockup restrictions expire; supply comes out in
    large quantities relative to the float. There are no
    earnings or cash flow to support the stock; forget stock
    buybacks. Everything fundamentally remains the same, but
    the stocks continue to sink. A stock that traded at
    $125 or $150 or even $200 now sells for $50, give or
    take a few bucks.

    What happened? NOTHING!! All
    we did was roundtrip to where we would have been if
    the company had gone public later (with earnings and
    cash flow) and been able to sustain a larger number of
    freely trading shares.

    I would like to think that
    a stock down 75% would not attract insider selling,
    but I fear differently. If you owned the shares with
    a cost basis of $0.50 or $2.00, does it really
    matter if you get $50 or $150 for your

    Remember, had this been a traditional IPO, the insiders
    would have been THRILLED with an price of $30-$50 a few
    years down the line. At these levels, they're ahead of
    the game: the stocks are still up more than they
    could have expected and in a shorter time

    There are exceptions -- CDNOW, KOOP, etc. -- where the
    stocks are down closer to 90%, but most are still
    comfortably in the "profit zone" for insiders, VC's,

    What to do? Well, I'm not on margin and though down
    substantially, I don't need the money. So I will wait, hope for
    a substantial rally or an announcement by insiders
    of a 6-month or 12-month moratorium on selling, and
    hope the stock moves up.

    It's frustrating: the
    stock can be drastically oversold, good quarterly
    results can be announced, and yet we can still sink and
    sink and sink. The opposite of what happened the first
    3 months: no operating results to speak of, losses
    upon losses, and the stocks flew to the moon.

    hope I'm wrong on this analysis -- I would stand to
    gain -- but I fear not.

    What to do? Make sure
    you don't tie up money you need, don't use margin,
    and don't overextend in any 1 sector or stock. That
    makes the pain more tolerable.

    This topic is deleted.
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    • CK,

      "First, let me state that in the
      interest of full disclouser I am long this stock at a
      higher level. Not much higher, but I am underwater. I
      thought I bought in at a good level, but I forgot to take
      into account what..."

      When I first read this I
      thought you were back in HCBK...but I guess you were
      referring to some tech stock you bought at a higher

      Hey, CK, I have some old tulip bulbs that
      I might be willing to sell....

      though, couldn't agree with you more about some of the
      net and tech stocks. Fortunately, I bought AMAT,
      ATML, EMC, ASND(LU), LSI, and CUBE years ago when they
      were selling much, much lower. Still holding. (And I
      can now say that I, for one, am no longer "poor,
      hungry and stupid"). Only SGI has been a big
      disappointment. But what the h*ll, you can't win 'em all.

      BTW, when HCBK hits 30 it's dinner and drinks on me
      for Kootz, PHS, JJR(wherever you are), and CK.


      • 2 Replies to encore122
      • That dinner and drinks I mentioned in the
        previous post...well, after today the dinner will have to
        be the "grand slam special" at Dennys and the drinks
        will be cokes.

        Poorhungryandstupid is going to
        have a hell of a lot of compatriots after today. But
        have no fear (if you weren't on margin) all the tech
        "major companies" will be back - but, it will probably
        take 6 months to a year now.

        Hope all you guys
        weren't hurt too badly.


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