AI
Friday, February 06, 2004 12:47:30 PM
Well, I can't answer the whole question, but management does have some history of rubbing shoulders with posters, do they not?
"Catching the Wave"
By Danny Hakim
Smartmoney.com
December 13, 1999
http://yahoo.smartmoney.com/stockwatch/index.cfm?story=199912141
MEET THE WAVOIDS. Forty-five of them surround Steven K. Sprague, the 36-year-old president and chief operating officer of Wave Systems (WAVX). It's late in the afternoon, a few days before Thanksgiving. Sprague has just finished with the formal part of Wave's shareholder meeting and now holds court in an anteroom of the Grand Hyatt hotel in New York. The glare of hot yellow lights reflects in circles across his broad cheeks and sandy brown hair. After a swig from his first Heineken, he begins to press flesh with the faithful.
ALMIMAN AND FATBOY: Eli Katz, a Santa Barbara psychiatrist (left), and Carl Theodore, a Boston day trader. Katz has about 55% or 60% of his equity investments in Wave. Theodore has about 90%.
Those faithful call themselves Wavoids. They wear their Internet message-board pseudonyms on their lapels. There is "Gemman," a gem dealer from Philly and "Yayapapadoc," an ad guy from D.C. There's "Fish_or_work," in suspenders, a high-school economics teacher from the Chicago suburbs. Two accountants from Massachusetts stand next to a retired Merrill Lynch vice president and a 51-year-old General Dynamics engineer who has his own 14-carat gold tie pin embossed with Wave's dancing juggler logo. "Fatboy," a 39-year-old full-time trader, sports a Massachusetts "WAVX" license plate around his neck and "Almiman", a semi-retired Santa Barbara psychiatrist, totes a California "I WAVX" license plate.
To a man, they have stakes in Wave that would make a financial planner pale. One has a quarter of all his equity investments in Wave — and he's the conservative one. The rest have at least half. And many have, in the words of Doug McCoy, a community-college administrator from the Chicago suburbs, "everything." Everything? "I've broken the first rule of investing," McCoy admits. It's a phrase you hear often from the Wavoids.
The temple of Wavoid devotion is an online message board at the Raging Bull Web site, where investors, short sellers and onlookers converge to talk stocks. How big is the Wave board? Put it this way. By midnight on the day of Wave's shareholder meeting, the Raging Bull boards for Microsoft, Yahoo!, eBay, Amazon.com and Priceline.com — the largest company on earth and four of the largest Internet companies — totaled 48,453 postings combined. Wave? 103,785 postings. That's roughly equal to five Amazons, a Microsoft and an eBay. Or 10 Yahoos, two eBays and a Microsoft. Or 14 Pricelines, an eBay and an Amazon. Anyway, it's a lot.
This is some following for a company that has posted $73,000 in revenue since its inception...in 1988! Wave lost $18.9 million in the first nine months of this year and lost $11.9 million last year. In all, it has lost some $76 million in 12 years. In 1997, Wave was delisted from Nasdaq because it failed to meet a minimum requirement of $4 million in tangible assets. (It has since been relisted.) So why does this obscure Massachusetts company, which makes a chip it touts as a gateway for a new generation of e-commerce but which has virtually no paying customers, inspire such zealotry?
Start with two words that eat at the heart of almost every investor: "If only." If only I'd invested in Microsoft when it first went public. If only I'd bought America Online in 1995. If only I'd bought Yahoo! at $3. Then add the stock-crazy, get-rich-quick stew the public bobs in these days — the ads featuring private-island-owning tow-truck drivers, the tales of Silicon Valley secretaries living large on stock-option pocket lint. Throw in the financial automatic-weapons fire of online news, day trading, CNBC, Nasdaq Level II, real-time quotes, Web brokers and after-hours trading. And lastly, the message boards, virtual altars around which true believers gather and whip themselves into a collective frenzy in the unshakeable conviction that Company X will transform something or the other, or shift a paradigm and become the next (your hotter-than-hot stock here).
Wave is the "Who Wants to Be a Millionaire?" stock. But it's hardly alone. Among the top six of Raging Bull's 10,000 boards bookmarked by its members, Wave is joined by two stocks that trade on the OTC bulletin board: Starnet Communications (SNMM), a Canadian Internet gambling company, and e.Digital (EDIG), a company developing technology to link portable devices to PCs and the Internet. All three are small companies that some investors think could tap into mega markets, and small enough that there's not much information on them besides what's on the boards. Of course, that could be the description of any number of companies. What makes one like Wave so compelling?
TRUMAN2B: David Bandler has everything in Wave stock. "It's an obsession, to be sure, and it's quite consuming."
Doug McCoy, a 30-year-old associate dean at Waubonsee Community College in the Chicago suburbs, has gathered for lunch before the shareholder meeting with about 15 other Wavoids. "Wave Systems will be bigger than Intel, AOL and Yahoo," says McCoy, who goes by his initials "DRM" on the board. "It will be the biggest e-commerce generator. It's the modern equivalent of finding gold."
At one end of a long rectangular table at the Hyatt's Crystal Fountain restaurant, McCoy sits with a clutch of other Chicago-area educators who, one way or another, have gotten into the stock on his advice. There's his brother Dave, a high-school economics teacher who says about five or six other faculty members at his school are Wavoids, including Gary LaRocco, a.k.a. "Pilot2," a wiry, intense-looking phys-ed teacher who sits next to Dave and across from Tim Kmetz — "Hifi_nut" — a buddy of Doug's from Illinois State.
This is the way it works among the Wavoids — little congregations of investors form around particularly fervent Wavoids in different regions. Doug McCoy says the Chicago group has had about three or four meetings in the past year, in which as many as 40 or 50 people show up for dinners and Wave talk at local restaurants. (A few such groups are scattered throughout the country.) Many Wavoids have met, gone to baseball games, grabbed dinners and followed the company on its road-show circuit.
But the real community of Wavoids is the virtual one, the one that exists on the Raging Bull message board. And as in a real community, the board's users cooperate and specialize. "You have hundreds and hundreds of investors coming together to pool their expertise," says Raging Bull co-founder Rusty Szurek, 22. "That's the beauty of message boards. I can get an accountant to help me read a balance sheet or a lawyer to help with an SEC filing." The Wave board even has a town cop. "Snackman," a.k.a. Larry Gordon, is a 59-year-old Coca-Cola distributor from Southern California who started the board and now tries to maintain order on it.
McCoy is the site's educator. He created WAVX 101, an online "course" for fledgling Wavoids that is quite literally the book on Wave. At 442 pages, it's really just an edited compendium of board postings, almost an oral history of the site. (Think of it as the Wavoid Iliad.) McCoy first heard about Wave from another investor, Almiman, in 1997, on a board for a different company. "Almiman" — Eli Katz of Santa Barbara, Calif. — heard about it from a friend who was a broker, and heard a buzz about a lot of other doctors in his area buying it, "guys who were normally conservative investors," he recalls.
Almiman, a goateed, laid-back psychiatrist, wears a white Wave knit shirt to lunch that bears the dancing juggler logo. He's got about 55% to 60% of his total portfolio invested in Wave. Like Doug, Almiman has converted many friends into Wavoids, including Barry Pearlman, a.k.a. "Gemman." "I don't have anything in Wave," says Pearlman, sitting next to Almiman at lunch. "Probably 25%." He is smiling. He knows that's a pittance to a Wavoid.
Meanwhile, the onrush of clicking continues during lunch. "Has anyone heard anything from the shareholders meeting?" someone asks on the Raging Bull board. It's just after noon and we're already on the 127th posting of the day. The Wavoids who couldn't make it are getting anxious for news from the ones in New York. A Wavoid called "Doogle" responds. He's heard McCoy has his laptop and will report from the field. "Tick, Tick, Tick," writes a third Wavoid. "You need a lot of patience with this stock. But we're all going to be rich!"
"Sixteen-and-a-half!" Back at the Hyatt, "CrazyLarry" is working his cell phone at the far end of the table. Smiles work their way down the group. Wave is up a quarter-point. CrazyLarry, Joe Torrisi of New Fairfield, Conn., pauses to consider the attraction of Wave. He's a jovial, 38-year-old with frizzy gray hair who owns three Budget Rental Car franchises. He's also a part-time day trader. Wave is his only long-term investment.
"I have faith in Nolan Bushnell, George Gilder, Negroponte," says CrazyLarry. "This is a visionary stock." CrazyLarry is referring to some of the colorful figures around Wave who have added to its mystique. Bushnell, the quixotic founder of Atari, is on Wave's board, as is technology guru Gilder, the economist and Forbes columnist. And "Being Digital" author Nicholas Negroponte is a longtime investor in Wave.
"This is a zero or 100% stock," says CrazyLarry. "No guts, no glory."
Peter Sprague is not your average suit. Sure, Wave's 60-year-old founder, CEO and chairman graduated from Yale and studied economics at Columbia. He also snuck into Hungary at age 17 to photograph Soviet tanks during the 1956 revolution. He started Iran's largest chicken farm and ran unsuccessfully for a House seat against former New York mayor Ed Koch in 1970. ("Only Republican ever endorsed by Bella Abzug," Sprague says.) Meanwhile, he spent three decades as chairman of National Semiconductor, which he took from receivership in 1965 to a company with $2.4 billion in revenue when he left in 1995. All this might have made for a complete-enough career, but Sprague has tinkering in his blood — his grandfather once worked for Thomas Edison — which brings us to what the Wavoids refer to as the "Calvin & Hobbes story."
"In 1988, I had a QuoteTrack machine in my pocket," Sprague says. "It had an LCD screen, and you could watch your portfolio. I thought it would be funny to get a Calvin & Hobbes cartoon in there, too." Getting a cartoon onto a portable device wasn't the problem, Sprague came to realize, it was getting the cartoon — or any content — paid for. So he designed a chip to solve the problem.
Nice idea. Bad timing. Sprague's chip predated the ubiquity of the Internet and wireless devices. Wave's initial public offering in 1994 met a tepid response, and the stock fluctuated around its $5 offering price for most of 1994 before heading into the tank and falling below $1 per share in 1995. When Peter's son Steven took over day-to-day operations the following year, the company had 60 days of cash on hand.
Remaking the company on a model more geared to the Internet proved difficult, and Wave's future appeared particularly bleak when it was delisted in 1997. Then three twentysomething entrepreneurs launched Raging Bull, and in June of 1998, a small clutch of Wavoids migrated over from a Yahoo! board. The new board juiced the stock. After starting 1999 under $4, Wave reached $10 and change by the beginning of March. Then it exploded to its all-time high of $29 at the end of the month.
There wasn't much news fueling the climb, but during those heady days last March the board postings reached something of a frenzy, with new posts arriving every few minutes, day and night, and speculation whizzing about Korean Wave sites, how many Wavoid millionaires were being minted and what Peter Sprague was doing on his European skiing vacation.
The Wavoids were feeling flush, and who could blame them? Some of them had gotten rich. By March 31, "French_Bikini" had a conundrum, which she confided in a posting. Would her new Kentucky WAVX plate go on her Sapphire Blue V8 Jaguar (with white interior), or would it go on her husband's Metrolite Silver XK8 Jag convertible? Her enthusiasm was understandable. French_Bikini, a.k.a. Yuliya Hansen, and her husband, Kendall Hansen, bought Wave in 1998 at $4 and had since put between 80% and 90% of their equity investments in the company. They were looking at a huge gain.
"I'm now wearing a little 16-inch skirt and taking a bow," French_Bikini wrote as Wave reached its crest. "I believe we can now apply for membership in the M club." That's M for millionaire.
FRENCH_BIKINI: Yuliya Hansen, the last Miss USSR. She and her husband put over 80% of their portfolio in Wave. They say the stock made them millionaires — briefly.
If McCoy is the Wave board's educator and Snackman, the cop, then French_Bikini would have to be the cheerleader. Hansen, 25, is the daughter of a former MIG pilot and has the historical distinction of being the last Miss USSR, donning the crown in 1992 as her homeland's map was reduced to puzzle pieces. When Wave reached $10, she posted a picture of herself modeling a swimsuit. A later posting included a picture of Yuliya standing in front of her husband's XK8. (He got the WAVX plate.) A triumphant Hansen wears a candy-apple red blouse, matching lipstick, flowing brown locks and eyeliner to rival Cleopatra. Oh yeah, there's also a bottle of Jack Daniel's on the Jag's back seat.
Peter Sprague is not sure what to make of this phenomenon, but he understands how powerful it is. Taking what he learned from Wave's Raging Bull board, he recently funded another company, MetaMarkets, which runs an interactive mutual fund in which investors can watch their manager on a Webcam, monitor his investments minute-to-minute and critique them on MetaMarkets' own boards.
"Nobody really understands [the board], and I don't know how it started, but when the stock moves, I don't call my CFO, I go to Raging Bull to see what the hell is going on," he says. The CEO and his son, the chief operating officer, also participate in the online debate, a practice that makes securities lawyers cringe but is increasingly common among executives. For many Wavoids, the Sprague presence rounds out the family.
"To see Peter and Steven come on, it's like mother and father coming on to say, 'Hi, how're you doing?'" Snackman says. "I've been on other boards, but never had the experience this one has given me. We share all this stuff between us. We cry together. We laugh together. We've ridden it from $25 to $7.50. Wave is the glue for all these strangers. I don't think I'll be on another board like this again."
And what does Sprague make of all the accumulated chatter about his company? A grin creases his ruddy face. "Some people say it's a pile of gold," he says. "Some people say it's a pile of shit."
Today, after 12 years of rewrites, Sprague's Calvin & Hobbes chip is the more fancy sounding "EMBASSY" — short for EMBedded Application Security SYstem. The chip acts both as a secure, independent environment for transactions and as an e-commerce meter, so consumers could theoretically rent games or music or any other content. Wave's other major initiative is a joint venture called Wavexpress. Simply put, it's an attempt to deliver Internet data over digital broadcasting channels.
Both of these technologies make some sense. The question is, will they ever sell? The answer depends on who you ask. Some professionals scoff at Wave's chances. Hedge-fund manager Thomas Claugus piqued Wavoid ire by taking shots in a July Barron's interview, in which he revealed he was shorting Wave and thought the company's "neat-o encryption technology" had "a very limited chance of success" and faced considerable risk from larger companies.
Claugus has plenty of company. From its March peak of $29, Wave dipped to $7 and change by September. It surged back over $19 by mid-November before retreating to its present $12 to $14 range. And while institutional investors have largely shunned the stock, short sellers have been attacking with a vengeance. In mid-June, a month after Wave was relisted, about 1.7 million of its shares were being sold short, meaning speculators were betting it would drop in price.
By mid-November, that number had soared to just over six million shares, out of a total float of only 33 million shares. Basically, one of every five or six Wave shares available was being sold short, leading short sellers on the Wave board like "Texas Dude" to gleefully taunt the Wavoids. "Nobody wants your damn meter," he wrote of EMBASSY a few weeks after the shareholder meeting as the stock continued to sputter. "They tried to sell it...No takers!"
So who's right? Wave has only one analyst, Steve Olson from the San Francisco investment boutique Pacific Growth Equities. Olson has had a Strong Buy rating on Wave since he started covering the stock in the middle of the year. But as is often the case with analysts' recommendations, Olson's view of the stock needs to be taken with a grain of salt, since Pacific Growth was Wave's underwriter for a $23 million private stock placement in April. Still, Olson has his reasons for bullishness.
"They've got a really compelling story, and it has limitless upside if it works," says Olson. "The big challenge is shifting the paradigm and getting PC makers to realize that this current architecture is inherently insecure, that you need an isolated environment to manage transactions."
Convincing PC makers to add another chip to their machinery is a daunting task, but there are positive developments. Wavoids feel a recent alliance formed by Intel, IBM, Hewlett-Packard, Microsoft and Compaq to create standards for a new generation of secure computing platforms cries out for Wave's solution. And a consortium of French banks and credit card companies working on a more secure Internet transaction system recently announced plans to test EMBASSY in a new generation of French PCs. Wave backers see this as a gateway for getting EMBASSY adopted as a security standard for millions of future European Union PCs. These are intriguing developments, but both are at too early a stage to handicap an outcome.
It's hard to find independent analysts who criticize Wave; many haven't even heard of the company. Run the basic idea by them, and you'll get differing reactions. "It looks like they're trying to build a solution that needs a problem," says Forrester Research analyst Charles Rutstein, after checking Wave's Web site. "What people fail to realize is that we're already doing a lot of business with the technology we have and nobody's really unhappy. We're all sending credit-card data over the Internet, just like we hand our credit cards to a waiter in a restaurant. So are people really going to pay for military-grade security for the Internet?"
The shareholder meeting is over and the Wavoids have retreated to their hotel rooms, to the bars, but mostly to the board. Doug McCoy begins summarizing his 20 pages of notes. Several posters speculate on what they would reap if Wavexpress were spun off. "Clyde1g" predicts an opening price of $17 for the next morning. (Wave didn't crack $16 for another two-and-a-half weeks.) Another poster, "Hoppedy," is getting frustrated ("Is making money taboo with this company?").
"Truman2b" has posted pictures of the proceedings. Truman2b is David Bandler, a 32-year-old who works in the IT department of a major financial magazine. He has everything in Wave and some more on margin to boot. He is a Wavoid's Wavoid. "There's a weird sense of community," he explains. "You've got all the types. It's an obsession, to be sure, and it's quite consuming."
Truman2b, it should be said, is not nuts. CrazyLarry is not crazy. Doug McCoy, Almiman and Fatboy all seem like normal guys, and that's what is most striking. In a decade, the Wavoids could all be laughing together or crying together. The professionals could be right or the Wavoids could be the Berkshire Bunch of the new millennium.
It’s past 11 p.m. Snackman is tucking the board to bed with a barrage of commentary. He believes the stock will appreciate tenfold when the revenue starts coming in. A Wavoid with the handle "1260" replies. He thinks Wave will be "one of the biggest cash cows ever" and plans to buy a new wardrobe when he finally gets to join the millionaire club. His only question is when it will happen. After 529 postings, the day is over for the board. "This company is on the road to greatness," writes Snackman, in closing. "Sit back and relax and enjoy the ride."
"Catching the Wave"
By Danny Hakim
Smartmoney.com
December 13, 1999
http://yahoo.smartmoney.com/stockwatch/index.cfm?story=199912141
MEET THE WAVOIDS. Forty-five of them surround Steven K. Sprague, the 36-year-old president and chief operating officer of Wave Systems (WAVX). It's late in the afternoon, a few days before Thanksgiving. Sprague has just finished with the formal part of Wave's shareholder meeting and now holds court in an anteroom of the Grand Hyatt hotel in New York. The glare of hot yellow lights reflects in circles across his broad cheeks and sandy brown hair. After a swig from his first Heineken, he begins to press flesh with the faithful.
ALMIMAN AND FATBOY: Eli Katz, a Santa Barbara psychiatrist (left), and Carl Theodore, a Boston day trader. Katz has about 55% or 60% of his equity investments in Wave. Theodore has about 90%.
Those faithful call themselves Wavoids. They wear their Internet message-board pseudonyms on their lapels. There is "Gemman," a gem dealer from Philly and "Yayapapadoc," an ad guy from D.C. There's "Fish_or_work," in suspenders, a high-school economics teacher from the Chicago suburbs. Two accountants from Massachusetts stand next to a retired Merrill Lynch vice president and a 51-year-old General Dynamics engineer who has his own 14-carat gold tie pin embossed with Wave's dancing juggler logo. "Fatboy," a 39-year-old full-time trader, sports a Massachusetts "WAVX" license plate around his neck and "Almiman", a semi-retired Santa Barbara psychiatrist, totes a California "I WAVX" license plate.
To a man, they have stakes in Wave that would make a financial planner pale. One has a quarter of all his equity investments in Wave — and he's the conservative one. The rest have at least half. And many have, in the words of Doug McCoy, a community-college administrator from the Chicago suburbs, "everything." Everything? "I've broken the first rule of investing," McCoy admits. It's a phrase you hear often from the Wavoids.
The temple of Wavoid devotion is an online message board at the Raging Bull Web site, where investors, short sellers and onlookers converge to talk stocks. How big is the Wave board? Put it this way. By midnight on the day of Wave's shareholder meeting, the Raging Bull boards for Microsoft, Yahoo!, eBay, Amazon.com and Priceline.com — the largest company on earth and four of the largest Internet companies — totaled 48,453 postings combined. Wave? 103,785 postings. That's roughly equal to five Amazons, a Microsoft and an eBay. Or 10 Yahoos, two eBays and a Microsoft. Or 14 Pricelines, an eBay and an Amazon. Anyway, it's a lot.
This is some following for a company that has posted $73,000 in revenue since its inception...in 1988! Wave lost $18.9 million in the first nine months of this year and lost $11.9 million last year. In all, it has lost some $76 million in 12 years. In 1997, Wave was delisted from Nasdaq because it failed to meet a minimum requirement of $4 million in tangible assets. (It has since been relisted.) So why does this obscure Massachusetts company, which makes a chip it touts as a gateway for a new generation of e-commerce but which has virtually no paying customers, inspire such zealotry?
Start with two words that eat at the heart of almost every investor: "If only." If only I'd invested in Microsoft when it first went public. If only I'd bought America Online in 1995. If only I'd bought Yahoo! at $3. Then add the stock-crazy, get-rich-quick stew the public bobs in these days — the ads featuring private-island-owning tow-truck drivers, the tales of Silicon Valley secretaries living large on stock-option pocket lint. Throw in the financial automatic-weapons fire of online news, day trading, CNBC, Nasdaq Level II, real-time quotes, Web brokers and after-hours trading. And lastly, the message boards, virtual altars around which true believers gather and whip themselves into a collective frenzy in the unshakeable conviction that Company X will transform something or the other, or shift a paradigm and become the next (your hotter-than-hot stock here).
Wave is the "Who Wants to Be a Millionaire?" stock. But it's hardly alone. Among the top six of Raging Bull's 10,000 boards bookmarked by its members, Wave is joined by two stocks that trade on the OTC bulletin board: Starnet Communications (SNMM), a Canadian Internet gambling company, and e.Digital (EDIG), a company developing technology to link portable devices to PCs and the Internet. All three are small companies that some investors think could tap into mega markets, and small enough that there's not much information on them besides what's on the boards. Of course, that could be the description of any number of companies. What makes one like Wave so compelling?
TRUMAN2B: David Bandler has everything in Wave stock. "It's an obsession, to be sure, and it's quite consuming."
Doug McCoy, a 30-year-old associate dean at Waubonsee Community College in the Chicago suburbs, has gathered for lunch before the shareholder meeting with about 15 other Wavoids. "Wave Systems will be bigger than Intel, AOL and Yahoo," says McCoy, who goes by his initials "DRM" on the board. "It will be the biggest e-commerce generator. It's the modern equivalent of finding gold."
At one end of a long rectangular table at the Hyatt's Crystal Fountain restaurant, McCoy sits with a clutch of other Chicago-area educators who, one way or another, have gotten into the stock on his advice. There's his brother Dave, a high-school economics teacher who says about five or six other faculty members at his school are Wavoids, including Gary LaRocco, a.k.a. "Pilot2," a wiry, intense-looking phys-ed teacher who sits next to Dave and across from Tim Kmetz — "Hifi_nut" — a buddy of Doug's from Illinois State.
This is the way it works among the Wavoids — little congregations of investors form around particularly fervent Wavoids in different regions. Doug McCoy says the Chicago group has had about three or four meetings in the past year, in which as many as 40 or 50 people show up for dinners and Wave talk at local restaurants. (A few such groups are scattered throughout the country.) Many Wavoids have met, gone to baseball games, grabbed dinners and followed the company on its road-show circuit.
But the real community of Wavoids is the virtual one, the one that exists on the Raging Bull message board. And as in a real community, the board's users cooperate and specialize. "You have hundreds and hundreds of investors coming together to pool their expertise," says Raging Bull co-founder Rusty Szurek, 22. "That's the beauty of message boards. I can get an accountant to help me read a balance sheet or a lawyer to help with an SEC filing." The Wave board even has a town cop. "Snackman," a.k.a. Larry Gordon, is a 59-year-old Coca-Cola distributor from Southern California who started the board and now tries to maintain order on it.
McCoy is the site's educator. He created WAVX 101, an online "course" for fledgling Wavoids that is quite literally the book on Wave. At 442 pages, it's really just an edited compendium of board postings, almost an oral history of the site. (Think of it as the Wavoid Iliad.) McCoy first heard about Wave from another investor, Almiman, in 1997, on a board for a different company. "Almiman" — Eli Katz of Santa Barbara, Calif. — heard about it from a friend who was a broker, and heard a buzz about a lot of other doctors in his area buying it, "guys who were normally conservative investors," he recalls.
Almiman, a goateed, laid-back psychiatrist, wears a white Wave knit shirt to lunch that bears the dancing juggler logo. He's got about 55% to 60% of his total portfolio invested in Wave. Like Doug, Almiman has converted many friends into Wavoids, including Barry Pearlman, a.k.a. "Gemman." "I don't have anything in Wave," says Pearlman, sitting next to Almiman at lunch. "Probably 25%." He is smiling. He knows that's a pittance to a Wavoid.
Meanwhile, the onrush of clicking continues during lunch. "Has anyone heard anything from the shareholders meeting?" someone asks on the Raging Bull board. It's just after noon and we're already on the 127th posting of the day. The Wavoids who couldn't make it are getting anxious for news from the ones in New York. A Wavoid called "Doogle" responds. He's heard McCoy has his laptop and will report from the field. "Tick, Tick, Tick," writes a third Wavoid. "You need a lot of patience with this stock. But we're all going to be rich!"
"Sixteen-and-a-half!" Back at the Hyatt, "CrazyLarry" is working his cell phone at the far end of the table. Smiles work their way down the group. Wave is up a quarter-point. CrazyLarry, Joe Torrisi of New Fairfield, Conn., pauses to consider the attraction of Wave. He's a jovial, 38-year-old with frizzy gray hair who owns three Budget Rental Car franchises. He's also a part-time day trader. Wave is his only long-term investment.
"I have faith in Nolan Bushnell, George Gilder, Negroponte," says CrazyLarry. "This is a visionary stock." CrazyLarry is referring to some of the colorful figures around Wave who have added to its mystique. Bushnell, the quixotic founder of Atari, is on Wave's board, as is technology guru Gilder, the economist and Forbes columnist. And "Being Digital" author Nicholas Negroponte is a longtime investor in Wave.
"This is a zero or 100% stock," says CrazyLarry. "No guts, no glory."
Peter Sprague is not your average suit. Sure, Wave's 60-year-old founder, CEO and chairman graduated from Yale and studied economics at Columbia. He also snuck into Hungary at age 17 to photograph Soviet tanks during the 1956 revolution. He started Iran's largest chicken farm and ran unsuccessfully for a House seat against former New York mayor Ed Koch in 1970. ("Only Republican ever endorsed by Bella Abzug," Sprague says.) Meanwhile, he spent three decades as chairman of National Semiconductor, which he took from receivership in 1965 to a company with $2.4 billion in revenue when he left in 1995. All this might have made for a complete-enough career, but Sprague has tinkering in his blood — his grandfather once worked for Thomas Edison — which brings us to what the Wavoids refer to as the "Calvin & Hobbes story."
"In 1988, I had a QuoteTrack machine in my pocket," Sprague says. "It had an LCD screen, and you could watch your portfolio. I thought it would be funny to get a Calvin & Hobbes cartoon in there, too." Getting a cartoon onto a portable device wasn't the problem, Sprague came to realize, it was getting the cartoon — or any content — paid for. So he designed a chip to solve the problem.
Nice idea. Bad timing. Sprague's chip predated the ubiquity of the Internet and wireless devices. Wave's initial public offering in 1994 met a tepid response, and the stock fluctuated around its $5 offering price for most of 1994 before heading into the tank and falling below $1 per share in 1995. When Peter's son Steven took over day-to-day operations the following year, the company had 60 days of cash on hand.
Remaking the company on a model more geared to the Internet proved difficult, and Wave's future appeared particularly bleak when it was delisted in 1997. Then three twentysomething entrepreneurs launched Raging Bull, and in June of 1998, a small clutch of Wavoids migrated over from a Yahoo! board. The new board juiced the stock. After starting 1999 under $4, Wave reached $10 and change by the beginning of March. Then it exploded to its all-time high of $29 at the end of the month.
There wasn't much news fueling the climb, but during those heady days last March the board postings reached something of a frenzy, with new posts arriving every few minutes, day and night, and speculation whizzing about Korean Wave sites, how many Wavoid millionaires were being minted and what Peter Sprague was doing on his European skiing vacation.
The Wavoids were feeling flush, and who could blame them? Some of them had gotten rich. By March 31, "French_Bikini" had a conundrum, which she confided in a posting. Would her new Kentucky WAVX plate go on her Sapphire Blue V8 Jaguar (with white interior), or would it go on her husband's Metrolite Silver XK8 Jag convertible? Her enthusiasm was understandable. French_Bikini, a.k.a. Yuliya Hansen, and her husband, Kendall Hansen, bought Wave in 1998 at $4 and had since put between 80% and 90% of their equity investments in the company. They were looking at a huge gain.
"I'm now wearing a little 16-inch skirt and taking a bow," French_Bikini wrote as Wave reached its crest. "I believe we can now apply for membership in the M club." That's M for millionaire.
FRENCH_BIKINI: Yuliya Hansen, the last Miss USSR. She and her husband put over 80% of their portfolio in Wave. They say the stock made them millionaires — briefly.
If McCoy is the Wave board's educator and Snackman, the cop, then French_Bikini would have to be the cheerleader. Hansen, 25, is the daughter of a former MIG pilot and has the historical distinction of being the last Miss USSR, donning the crown in 1992 as her homeland's map was reduced to puzzle pieces. When Wave reached $10, she posted a picture of herself modeling a swimsuit. A later posting included a picture of Yuliya standing in front of her husband's XK8. (He got the WAVX plate.) A triumphant Hansen wears a candy-apple red blouse, matching lipstick, flowing brown locks and eyeliner to rival Cleopatra. Oh yeah, there's also a bottle of Jack Daniel's on the Jag's back seat.
Peter Sprague is not sure what to make of this phenomenon, but he understands how powerful it is. Taking what he learned from Wave's Raging Bull board, he recently funded another company, MetaMarkets, which runs an interactive mutual fund in which investors can watch their manager on a Webcam, monitor his investments minute-to-minute and critique them on MetaMarkets' own boards.
"Nobody really understands [the board], and I don't know how it started, but when the stock moves, I don't call my CFO, I go to Raging Bull to see what the hell is going on," he says. The CEO and his son, the chief operating officer, also participate in the online debate, a practice that makes securities lawyers cringe but is increasingly common among executives. For many Wavoids, the Sprague presence rounds out the family.
"To see Peter and Steven come on, it's like mother and father coming on to say, 'Hi, how're you doing?'" Snackman says. "I've been on other boards, but never had the experience this one has given me. We share all this stuff between us. We cry together. We laugh together. We've ridden it from $25 to $7.50. Wave is the glue for all these strangers. I don't think I'll be on another board like this again."
And what does Sprague make of all the accumulated chatter about his company? A grin creases his ruddy face. "Some people say it's a pile of gold," he says. "Some people say it's a pile of shit."
Today, after 12 years of rewrites, Sprague's Calvin & Hobbes chip is the more fancy sounding "EMBASSY" — short for EMBedded Application Security SYstem. The chip acts both as a secure, independent environment for transactions and as an e-commerce meter, so consumers could theoretically rent games or music or any other content. Wave's other major initiative is a joint venture called Wavexpress. Simply put, it's an attempt to deliver Internet data over digital broadcasting channels.
Both of these technologies make some sense. The question is, will they ever sell? The answer depends on who you ask. Some professionals scoff at Wave's chances. Hedge-fund manager Thomas Claugus piqued Wavoid ire by taking shots in a July Barron's interview, in which he revealed he was shorting Wave and thought the company's "neat-o encryption technology" had "a very limited chance of success" and faced considerable risk from larger companies.
Claugus has plenty of company. From its March peak of $29, Wave dipped to $7 and change by September. It surged back over $19 by mid-November before retreating to its present $12 to $14 range. And while institutional investors have largely shunned the stock, short sellers have been attacking with a vengeance. In mid-June, a month after Wave was relisted, about 1.7 million of its shares were being sold short, meaning speculators were betting it would drop in price.
By mid-November, that number had soared to just over six million shares, out of a total float of only 33 million shares. Basically, one of every five or six Wave shares available was being sold short, leading short sellers on the Wave board like "Texas Dude" to gleefully taunt the Wavoids. "Nobody wants your damn meter," he wrote of EMBASSY a few weeks after the shareholder meeting as the stock continued to sputter. "They tried to sell it...No takers!"
So who's right? Wave has only one analyst, Steve Olson from the San Francisco investment boutique Pacific Growth Equities. Olson has had a Strong Buy rating on Wave since he started covering the stock in the middle of the year. But as is often the case with analysts' recommendations, Olson's view of the stock needs to be taken with a grain of salt, since Pacific Growth was Wave's underwriter for a $23 million private stock placement in April. Still, Olson has his reasons for bullishness.
"They've got a really compelling story, and it has limitless upside if it works," says Olson. "The big challenge is shifting the paradigm and getting PC makers to realize that this current architecture is inherently insecure, that you need an isolated environment to manage transactions."
Convincing PC makers to add another chip to their machinery is a daunting task, but there are positive developments. Wavoids feel a recent alliance formed by Intel, IBM, Hewlett-Packard, Microsoft and Compaq to create standards for a new generation of secure computing platforms cries out for Wave's solution. And a consortium of French banks and credit card companies working on a more secure Internet transaction system recently announced plans to test EMBASSY in a new generation of French PCs. Wave backers see this as a gateway for getting EMBASSY adopted as a security standard for millions of future European Union PCs. These are intriguing developments, but both are at too early a stage to handicap an outcome.
It's hard to find independent analysts who criticize Wave; many haven't even heard of the company. Run the basic idea by them, and you'll get differing reactions. "It looks like they're trying to build a solution that needs a problem," says Forrester Research analyst Charles Rutstein, after checking Wave's Web site. "What people fail to realize is that we're already doing a lot of business with the technology we have and nobody's really unhappy. We're all sending credit-card data over the Internet, just like we hand our credit cards to a waiter in a restaurant. So are people really going to pay for military-grade security for the Internet?"
The shareholder meeting is over and the Wavoids have retreated to their hotel rooms, to the bars, but mostly to the board. Doug McCoy begins summarizing his 20 pages of notes. Several posters speculate on what they would reap if Wavexpress were spun off. "Clyde1g" predicts an opening price of $17 for the next morning. (Wave didn't crack $16 for another two-and-a-half weeks.) Another poster, "Hoppedy," is getting frustrated ("Is making money taboo with this company?").
"Truman2b" has posted pictures of the proceedings. Truman2b is David Bandler, a 32-year-old who works in the IT department of a major financial magazine. He has everything in Wave and some more on margin to boot. He is a Wavoid's Wavoid. "There's a weird sense of community," he explains. "You've got all the types. It's an obsession, to be sure, and it's quite consuming."
Truman2b, it should be said, is not nuts. CrazyLarry is not crazy. Doug McCoy, Almiman and Fatboy all seem like normal guys, and that's what is most striking. In a decade, the Wavoids could all be laughing together or crying together. The professionals could be right or the Wavoids could be the Berkshire Bunch of the new millennium.
It’s past 11 p.m. Snackman is tucking the board to bed with a barrage of commentary. He believes the stock will appreciate tenfold when the revenue starts coming in. A Wavoid with the handle "1260" replies. He thinks Wave will be "one of the biggest cash cows ever" and plans to buy a new wardrobe when he finally gets to join the millionaire club. His only question is when it will happen. After 529 postings, the day is over for the board. "This company is on the road to greatness," writes Snackman, in closing. "Sit back and relax and enjoy the ride."
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