Internet Update:

Takeovers Spark Price Jumps

Dateline: 04/10/00

* without BCE Emergis - 1875.3
^# without TD Waterhouse - 3089.3

Week in Review

Wasn't that a party? The frenzy in the markets last week was enough to drive an investor to drink! (or at least the heavily margined ones.) Not only did the weakness of recent weeks continue into a further drop on Monday April 3rd, but Tuesday saw the markets take huge intraday hits until recovering to settle at a modest loss. If you can call a 232.9 point drop in the TSE 300 modest.

The TSE 300 reached an intraday low Tuesday of 8,656.4, a drop of 718.3 points from Monday's close - down 7.66% before recovering with a late rally. Other markets were much the same.

The CDNX dropped as much as 494.5 points before bouncing back to close at 4000.6, down only 246.0 points. The peak loss for the day represented a staggering fall of 11.64%.

In New York the Dow took an intraday hit of 504.15 points, a loss of 4.49% before recovering to close at 11,164.84, down only 57.09 points.

The NASDAQ declined 574.5 points intraday, a loss of 13.60% before recovering to close at 4148.8, down only 74.8 points.

By the end of the week though, both the Dow and the TSE 300 were up over last Friday's close, while the NASDAQ and CDNX were down marginally.

Corporate Takeovers

We've hear a lot in the news of takeovers and mergers. How they affect a stock's price varies. The company being taken over usually shows a price jump as the bidding company usually offers more than current market value in order to entice the shareholders to sell. On the other hand, the company making the offer can go either up or down depending on whether the market views the proposed acquisition as good for the company or not.

Ace stock market guru Peter Lynch writes in his best-selling One Up on Wall Street about the dangers of "diworseification". "Instead of buying back shares or raising dividends," says Lynch, "profitable companies often prefer to blow the money on foolish acquisitions."

By foolish he means companies that are overpriced and beyond the realm of the acquiring company's understanding. A smart acquisition, on the other hand, is one that enhances the company's value. One that contributes to the company's core business, either through furthering vertical integration or by the outright takeover of a direct competitor.

Occasionally surprises occur. Northern Electric's takeover of Bay Networks in 1998 was frowned on by the market and the stock took a dive. But Northern Electric was in the process of re-inventing itself and eventually, the acquired company became its main business. It is now an industry leader and the number two networking company in the world after Cisco Systems. And CEO John Roth thinks it has the moxie to go toe-to-toe with Cisco and beat it for world domination.

In this week's Movers and Shakers Report, two of the top five stocks moved up smartly on word they were the subject of takeover bids. T&E Theatre.com and Peaksoft Multinet are both selling off their key websites to other firms. And another of our top five, Patchgear.com, is acquiring a complementary website.

This week's Report shows a marked improvement over last week when 99 stocks posted double digit losses. This week there were only 28. On the upside there were 25 double digit gainers compared to only six the week before.

Now on to our Movers & Shakers Report.

Movers & Shakers Report
Previous Movers & Shakers Reports

Our Weekly Updates

We've put up the new numbers for our Internet Index. You'll also find the complete weekly and YTD changes for all the stocks on our Movers & Shakers Master List. You'll also find new additions to our Penny List.

Canadian Internet Index
Canadian Internet Penny Stock List
Yankee Stock List
Billion Dollar Babies
Movers & Shakers Master List

This week we profile Cinema Internet Networks. We also link to T&E Theatre.com which was profiled here previously and has been updated. And of course, we link to an index of our previous profiles. There are now 43 profiled companies.

Comments? Suggestions? Why not post them on our Bulletin Board or email me.

E-mail me!

ZZZNEWSLETTERSIGNUP1ZZZ

Recent Articles

04/06/00 - S is for Supply and Demand
You can improve your stock picking acumen by understanding the basic economic concepts of supply and demand. Fourth in our CANSLIM series.

04/03/00 - Bear or Bear Market Trap?
Is this the beginning of a bear market or are we seeing a classic bear market trap?

03/30/00 - How to...Pages
Check out our new How to Pages for short one page answers to commonly asked questions.

03/27/00 - Net Stock Weakness Continues
Despite the TSE 300 breaking 10,000, Canadian Internet stocks are still showing some weakness.

03/23/00 - Canadian Bio-Tech
Guest columnist Derek Moscato looks at the hot Canadian Bio-Tech sector.

Copyright Notice: The mail graphic was taken from Icons For HTML and is believed to be in the public domain. Please advise me if that is not the case.

Previous Features