Lycos was being pushed around by investors for a second day Wednesday amid lingering disappointment over the company's merger with USA Networks.
The relatively low premium paid to Lycos shareholders sent a chill through other Internet stocks. Traders shuddered to think what might happen to their portfolios if Net outfits actually were valued like other firms.
Scary.
The broader market was struggling to recover from Tuesday's sell-off. Bargain hunters were busily combing through the rubble, but sentiment remained jittery, and it was clear that volatility is still the order of the day.
The Dow Jones Industrial Average rose 28.84 points to 9161.87 in mid-afternoon trading, and the Nasdaq Composite Index was 5.72 higher at 2316.51. The S&P 500 rose 5.04 to 1221.18.
Lycos (LCOS) dropped US$5.13 to $89.13 after plunging 26 percent a day earlier. While no one is arguing with the portal's position that its tie-up with USA Networks makes for a strong e-commerce combo, there's deep disenchantment with the terms of the deal. Investors are astonished that Lycos shareholders will receive only a minimal premium as part of the acquisition, and that Lycos, which has long insisted on its yearning to breathe free, will settle for a minority partnership in the new venture.
Wall Street made its feelings painfully clear. Lycos' stock was downgraded by Credit Suisse First Boston, BT Alex Brown, CIBC Oppenheimer, and Volpe Brown Whelan.
"People were in the stock for a large take-out," said Scott Appleby, an analyst with ABN AMRO. "Lycos is a company whose stock has doubled in the last couple of months. It was a presumption that the stock would be taken over with a premium."
Traders' bruised feelings weren't helped by a report in The Wall Street Journal that Lycos' two top execs, CEO Robert Davis and CFO Edward Philip, filed with regulators to sell off nearly $12 million worth of shares last month, while the stock was soaring on deal speculation.
At a technology symposium, both men insisted that the merger with USA and its Home Shopping Network had been misunderstood by the market. The combined company will have "all of the excitement of the Internet combined with substantial earnings," Davis said. "This will be seen as a defining moment."
In a nice bit of irony, meanwhile, Shop At Home (SATH), the third-largest home-shopping retailer, plunged 27 percent to $14.69 after disappointing investors by failing to link up with an established portal. Although Shop At Home said it will develop an online auction service -- who isn't these days? -- analysts had been looking for the company to expand its TV audience with the reach of an Internet search engine.
Facing an image problem of its own, Amazon.com (AMZN) moved quickly to retreat from plans to whore out its site by allowing publishers to pay for featured recommendations. Now Amazon will make sure customers know that a glowing blurb is in fact a paid advertisement. Nevertheless, the company's stock was caught in the vortex swallowing most Net shares, and it was down $1 at $99.
And here's one you could see coming a mile off: ETrade Group (EGRP) shed $1.06 to $39.13 after a customer filed a class-action suit against the online broker for its system having crashed four times last week. "As a result of this virtual lockout," the suit charges, "class members lost potentially millions of dollars."
Or, considering the market's recent turbulence, they ended up saving potentially millions of dollars. The suit doesn't take that into account, though.
