E-Mailbag Monday: Inforte, StarMedia, Warrants
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What's the big IPO for the week?
Reply: Inforte looks particularly strong. The company is a so-called eBusiness integrator. In other words, it consults companies in transforming their organizations with Web technologies. Inforte helps with everything: customer experience, business-to-business, business-to-consumer, strategy, supply chain restructuring, internal operations management, and so on. Inforte provides a true holistic approach to Web-ification of a company.
The company runs on cutting-edge management philosophies, such as Velocity to Value (V2V). It allows for projects that are high-quality, on time and within budget (magic to a client's ears).
For the first nine months of 1999, revenues were $20.5 million. Clients include Sun, Intuit and Citibank.
In the Stars...
What do you think of StarMedia?
Reply: StarMedia (STRM) is a leading portal in Latin America. But Wall Street has had concerns: competition from the likes of Yahoo!, AOL and others; and the fact that the Latin American Net market is still early.
Regardless, I think StarMedia represents a good value. In the company's latest earnings report, there was revenue of $9 million, up 176 percent from the same period a year ago. While losses were $27.8 million, they were lower than expected.
What's more, StarMedia is increasingly gaining mindshare. The site got 1.7 billion page view in the past quarter. This was a 42 percent sequential growth rate. Perhaps, this is the reason that StarMedia may make an interesting buyout candidate.
I frequently hear about companies -- like AOL -- getting warrants. What does this mean?
Replay: With the stock market booming, many companies want to find ways to get equity in other companies. Of course, AOL does this often. Amazon.com has recently done the same. The most common approach is the use of warrants.
A warrant gives you the right to buy stock in a company at a fixed price (exercise price) over a fixed period of time. If the value of the stock goes above the exercise price, then it makes sense to convert the warrant into stock of the company.
However, it is rare for individual investors to get warrants. Rather, a way to accomplish the same thing is to purchase stock options. A call option gives you the right to buy a stock for a fixed price, whereas a put option gives you the right to sell at a fixed price. This right lasts for three months. As for warrants, the right can last for several years.