جمشيد
15-03-2005, 09:56 PM
TravelZoo (TZOO): 50.77 +2.87: One of the most volatile stocks over the past year has been TravelZoo. The stock jumped from single digits to triple digits, then slid back to $50 a share only to make a recent run. It is safe to say that run came to an end on March 11, and was almost decapitated yesterday afternoon as the stock dropped from the $52 range to a handle that started with $48.
Late in the day, an SEC filing noted that TravelZoo CEO Ralph Bartel had sold shares in the open market, including sales on March 11 of 167, 879 shares at $56.31 and then yesterday he sold 517,121 shares at $48.08.
The sales should not really come as a surprise, as the CEO noted that he would be selling some of the shares that he owns. Before the sale, Bartel owned 84% of the outstanding stock of TravelZoo. That meant that there was a very thin float. The float, or number of shares actually available for trading, was often pointed to as the reason for the run-up in share price. The story was that as momentum players latched onto the idea they would dive in and force the shorts to cover, which would in turn bring in more momentum players. It was a day trader's playground.
This vicious cycle of shorting and covering and momentum players took the stock very high, very quick. Now with the CEO selling shares, but really not that many in the big picture of things, the stock is free to run around again. Shorts have new ammunition on their side as they point to the fact that the CEO was happy to get out around $50 a share, but this is of course the wrong type of thinking that got them in a short and cover scenario in the first place.
If no one else has noticed, let us be the first to inform the shorts, and other investors for that matter, on how TravelZoo trades. First of all, it does not trade based on fundamentals whatsoever. Any notion that this stock moves based on its revenues or earnings is a wrong notion. This stock moves on the whim of the momentum crowd and now that a proverbial shoe has dropped, there is less pressure on the stock from which short side momentum players can gain a foothold. Of course that shoe is the selling of shares by the CEO, but do note that only 685,000 shares caused the stock to drop around 20%. Now the power of the momentum swing is beginning to be understood.
TravelZoo has been the exact blueprint of what most wealthy entrepreneurs should do. Start the business with mostly their own capital, releasing a precious few shares to the public. Make sure the business sees some growth (nothing out of control, but growth just the same) and add to that a pinch of profitability and you have the recipe. The just deserts for following the recipe have been around $34 million for just 685,000 shares for Mr. Bartel. We would have to imagine that there will be several more layers put on his cake, and the bulls and the bears will continue to chase each others tail at the zoo.
Late in the day, an SEC filing noted that TravelZoo CEO Ralph Bartel had sold shares in the open market, including sales on March 11 of 167, 879 shares at $56.31 and then yesterday he sold 517,121 shares at $48.08.
The sales should not really come as a surprise, as the CEO noted that he would be selling some of the shares that he owns. Before the sale, Bartel owned 84% of the outstanding stock of TravelZoo. That meant that there was a very thin float. The float, or number of shares actually available for trading, was often pointed to as the reason for the run-up in share price. The story was that as momentum players latched onto the idea they would dive in and force the shorts to cover, which would in turn bring in more momentum players. It was a day trader's playground.
This vicious cycle of shorting and covering and momentum players took the stock very high, very quick. Now with the CEO selling shares, but really not that many in the big picture of things, the stock is free to run around again. Shorts have new ammunition on their side as they point to the fact that the CEO was happy to get out around $50 a share, but this is of course the wrong type of thinking that got them in a short and cover scenario in the first place.
If no one else has noticed, let us be the first to inform the shorts, and other investors for that matter, on how TravelZoo trades. First of all, it does not trade based on fundamentals whatsoever. Any notion that this stock moves based on its revenues or earnings is a wrong notion. This stock moves on the whim of the momentum crowd and now that a proverbial shoe has dropped, there is less pressure on the stock from which short side momentum players can gain a foothold. Of course that shoe is the selling of shares by the CEO, but do note that only 685,000 shares caused the stock to drop around 20%. Now the power of the momentum swing is beginning to be understood.
TravelZoo has been the exact blueprint of what most wealthy entrepreneurs should do. Start the business with mostly their own capital, releasing a precious few shares to the public. Make sure the business sees some growth (nothing out of control, but growth just the same) and add to that a pinch of profitability and you have the recipe. The just deserts for following the recipe have been around $34 million for just 685,000 shares for Mr. Bartel. We would have to imagine that there will be several more layers put on his cake, and the bulls and the bears will continue to chase each others tail at the zoo.