Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, August 10, 1995 TAG: 9508100068
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: The Washington Post
DATELINE: NEW YORK LENGTH: Medium
The stock opened for trading at $28 a share and instantly soared to $75. The price settled lower in the afternoon as what passed for cooler heads prevailed. Netscape closed at $58.25, up $30.25 for the day.
About 13 million shares changed hands, nearly three times the amount of the initial public offering on Tuesday.
``How crazy was it?'' said Andy Brooks, a trader at mutual-fund giant T. Rowe Price Associates Inc. in Baltimore, said, ``Retail investors were swamping our discount brokerage operation with buy orders. They think Netscape could be another Microsoft. We have never gotten anywhere near as many calls as today. It was nothing but a mania.''
As small investors rushed in, large institutions, which had been allocated stock the day before at the initial offering price of $28 a share, sold into the rally for huge profits.
``If you have a 250 percent profit in five minutes what would you do? Keep your money on the table or cash in your chips? Most people who got the stock on the offering (before trading started Wednesday morning) flipped immediately,'' said Kathy S. Smith, an analyst at renaissance Capital Corp., which reviews initial public offerings for professional investors.
Individual investors were allocated a minuscule amount of Netscape at the offering price, in the range of 5 percent. One of these lucky few was NBC News anchorman Tom Brokaw.
``I have a daughter in California who is a cyberspace nut,'' Brokaw said. ``She called two weeks ago asking me to get her shares in some IPO called Netscape, which I'd never heard of. She couldn't get any shares because the deal was so hot.''
So he called his personal brokers, one at Morgan Stanley & Co., which managed the Netscape deal, and Allen & Co., a boutique investment bank specializing in media companies. Brokaw ended up getting 100 shares for his daughter and 100 for himself.
He said he had no idea if his broker had flipped the shares when Netscape began trading Wednesday on the Nasdaq stock market.
Many analysts on Wall Street took the Netscape frenzy as a sign that the 13-year bull market in stocks may be peaking.
``I think this is a defining moment in the market,'' said Robert Kennedy, a stockbroker at Prudential Securities Inc. ``The action in Netscape is outright blind-eyed speculation that this is another Microsoft. Time will tell, but I think this will be seen in retrospect as an overzealous market chasing something that is not there.''
A source at the Soros Organization, overseen by master speculator George Soros, saw Netscape as a measure of the madness in Wednesday's markets.
``Today saw unbelievable action on Netscape and much frothiness in biotech stocks,'' said this source, who did not want to be identified. ``Meanwhile, we saw weakness in many major stocks like Chrysler ... Philip Morris. People want to own the go-go stocks like Netscape that have no earnings to speak of. If you are worried that a company might announce disappointing earnings and get hammered in the market, you go to the stocks that don't have any earnings to disappoint.''
Founded last year, the company had revenues of $16.6 million for the first six months of 1995. Netscape is not yet profitable - it lost $8.5 million last year.
Its main product is a popular software program called the Navigator that allows users of the Internet to find information quickly and easily.
by CNB