E-Mailbag Monday: FreeMarkets, Ashford.com, Organic Growth

What’s your opinion of FreeMarkets?

Reply: Typically, in December the IPO market cools down, as people
go on vacations and drink egg nog and such. However, there seems to be no
stopping the IPO market.

FreeMarkets is one of the companies that should be spectacular. It is a
business-to-business company (need I say more?), which specializes in
developing sophisticated auction technology. The technology is flexible
enough to deal with many industries as well as qualitative factors (such as
nonprice components, currency translations and so on).

In 1998, FreeMarkets handled auctions for about $1 billion in purchase
orders. As for the first six months of 1999, the amount was $630 million.
Customers include General Motors, Quaker Oats and Allied Signal.

Both Goldman Sachs and Morgan Stanley are the underwriters. The proposed
ticker symbol is FMKT and the price range is $14-$16.

Ashford.com: Still Sparkling

I recently purchased Ashford.com at 13.875 on 11/23/99, because of your
article. Today, when I pulled it up, it had hit 35. Because it is a first
in its market, do we have any idea where it will go? Curious on when I
should get out.

Any insight would be great!

Reply: Ashford.com (ASFD)
has been on a wild ride. The stock is now trading at $19-1/4. I
think there is still much more upside to this stock.

True, as with any new company, there have been glitches. This week, the
Web site had a major error. Basically, you could have purchased a Gucci
watch for free. It was a model 720L (of course, with a gold case and there
was free shipping).

The fact remains that the company is the leader in the luxury e-commerce
space, which should benefit greatly this Christmas. In fact, Amazon.com (AMZN)
bought 16.6 percent of the company for $11 million.
No, this was not a pricing error either, as Amazon.com definitely has much
clout. However, the deal calls for Ashford.com to sell its high-end items
to the masses of Amazon.com.


Organic Growth

What does the phrase “organic growth” mean?

Reply: This is a common buzz word in finance. In essence, this is
the growth in sales that occurs from existing operations. So, the sales
that result from, say, mergers and acquisitions are not part of organic
growth. If much of a company’s growth is not organic, then this could be a
danger sign. It may indicate that the core business is not very strong.


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