M&A Goes Bottom Fishing

Is it just me, or is Main Street feeling a little grumpier of late? People
I’m meeting out and about seem to be edgier, worried over their retirement
funds and the like. And this last week alone, I’ve been dishing investment
advice like a Pez dispenser.


Even when I called to cancel a free trial with AOL this weekend, an eager
customer service representative chatted for twenty minutes on the phone
talking stocks. He was anxious to ask everything he’d ever wanted to know
about stocks but was afraid to ask.


But I can’t blame ’em. Just look at this mess in the markets. In my spare
time, I go through Internet indices to see the casualties of speculation.


I’d like to bring readers up to speed on the Net’s who’s-who list of
walking wounded. But penning this column, I found myself saddled with an
attack of the puns. So, try not to take it personally. So far
Mortgage.com (MDCM)
is the limbo leader at $1.62, with MotherNature.com (MTHR)
hot on its heels.


Other notables include onlinetradinginc.com (LINE)
. Margin call!


Drkoop.com (KOOP)
. Diagnosis. Terminal.


E-Stamp (ESTM)
. Return to sender.


CareerBuilder (CBDR)
. Headed for the unemployment lines.


Salon.com (SALN)
. Having a bad hair day.


Ilife.com (ILIF)
. See drkoop.


Theglobe.com (TGLO)
. Fallen off the map.


Musicmaker.com (HITS)
. Ferris, Baker, Watts?


PlanetRx.com (PLRX)
. “Houston, we have a problem.”


Since the onset of Internet and the glut of retail investors participating
in stocks, the market is accustomed to slightly different metrics than
market corrections of past. When stocks build market cap overnight, it
stands to reason the opposite holds true. I’m not sure if anyone’s coined
the term yet, but it’s what I like to call a “hypercorrection.”


It makes a lot of sense considering many new investors’ attitude of instant
gratification. The selling is more dramatic, and so should be the recovery.
Like a traditional correction, techs slide amidst panic selling but do so
in a condensed duration. Now, if day traders could only discover the
advantages to long-term investing, outlasting a short-term correction would
be a cinch.


As far as mergers and acquisitions go, some companies are taking it on the
chin in these rough waters. When you use stock as currency for
acquisitions, now’s not a good time to carry on courtships. Today’s Rolex
is tomorrow’s cheap gold watch. So expect the M&A front to stay cool for
the time being. But, in my hypercorrection, things do turn on a dime.


This one belongs squarely in the off-topic bin, but I went house hunting
over the weekend and found a dreamy bungalow straight out of Hansel and
Gretel, atop a hillside. I think I’ll take it, but I’m going to have to
give up my coveted broadband connection and static IP address. You see, the
house is too far from the phone company’s call center to qualify for
access. But you should see the view. Life’s full of compromises.


They said it would never happen. But last week, Dutch-based grocery

retailer Royal Ahold N.V. (AHO)
announced plans to boost its online initiative and bail out sentimental
e-grocer favorite Peapod (PPOD)
. The windfall would give Peapod $73 million and a $20 million revolving
line of credit.


Amidst a sea of red, Peapod was a big winner Friday, climbing $0.69 to
$3.19, or nearly 30% on the day. Of course, if you rub two wooden nickels
together, you still don’t end up with a dime. This is great news for Peapod
execs, but this company is finished as a viable investment. If you’re not
bottom-fishing or bargain hunting, your money is best served elsewhere. If
you’re married to investing in the last-mile enablers, stick with a leader
like Webvan (WBVN)
or Kozmo’s upcoming offering.


















DealTracker scorecard: Royal
Ahold/Peapod.com

Investor
sentiment
C
Terms of the
deal
C-
Industry
outlook
B-
Overall
scorecard
C


The big loser on the day went to E.piphany (EPNY)
by a nose. The personalization and e-analytical software maker said it
would acquire privately-held eClass Direct for 750,000 shares of
common stock. E.piphany lost darn near half its market cap later that
afternoon.


In this case, a deal that was valued at roughly $60 million found itself
floundering at $35 million by lunchtime. That’s like finding the man of
your dreams only to find out he’s got a raging case of halitosis during the
goodnight kiss. But, don’t expect an annulment from eClass here. It’s in a
crowded market of permission-based e-mail marketing ASPs, and this deal
still looks pretty sweet over the long-term.


Any questions or comments, love letters or hate mail? As always, feel free
to forward them to [email protected].


















DealTracker scorecard: E.piphany/eClass Direct

Investor
sentiment
F
Terms of the
deal
C+
Industry
outlook
B+
Overall
scorecard
C

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