E-Mailbag Monday: Derivative Securities, Barnesandnoble.com, HealthGate
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I've heard the phrase "derivative security" several times. What does it mean?
Reply: As the name implies, this is a security that derives value from another security. For example, a call option is derived from the value of a stock that trades on an exchange. The call gives an investor the right to buy 100 shares over a three month period at a stated price. However, derivatives can be very complex and risky.
Barnesandnoble.com seems to be doing much lately. How do you rate them?
In the fourth quarter, the company's sales more than tripled -- about $81.5 million (up from $25.9 million in the same period a year ago). For the year of 2000, the company had $200 million in sales, compared to $61.8 million last year.
The company has built an incredible infrastructure of branding, distribution and technology. Unlike Amazon.com, barnesandnoble.com is supposed to report a loss that's within analysts' estimates.
Morevoer, last week barnesandnoble.com announced a deal with Microsoft to build an online store that allows users to read books straight from their computers, using Microsoft's new Reader software.
IPO in the Emergency Room
What are the chances for the HealthGate Data IPO?
Reply: In January do not expect much from IPOs. And, yes, HealthGate Data plans on doing its IPO in January. Interestingly enough, the company filed its IPO on April 23, 1999, which is a long-time to be on the IPO calendar. Just like bread, keeping an IPO on the calendar too long can make things stale.
HealthGate Data is an online health care company. True, healthcare is large and there is room for several online healthcare companies. However, I think HealthGate Data is too late. There are so many other stronger companies -- that are already public. I think the best play is Healtheon/WebMD (HLTH) . I also like drKoop.com (KOOP) as a speculation.