PQ: ‘We’re truly representative of the market for small tech companies: Everyone has been beat to death.’-KnowledgeMax investor-relations guy
I received a rather rude letter from my stock-broker recently. It included a form authorizing him to sell, for $1, an Internet stock for which I once had high hopes. “I understand that there currently is no market for the security,” read the document that he wanted me to sign. If I don’t, my broker warns, he’ll be forced to charge me a $50 account fee, since that one beleaguered stock constitutes my entire portfolio with him. Common sense suggests I sign and return the form in the enclosed postage-free envelope. When I purchased the company (known as Sideware Systems Inc.) a couple of years back, it was trading for around $10 a share, near its all-time high.
I bought it based on the advice of a friend who’d supposedly done voluminous research on the company. Sideware first attracted attention with an electronic version of the Post-It note. (They changed the product’s name to Tagalongs after 3M commenced legal proceedings against them.) Their main claim to fame was “Dr. Bean,” a software program that provides customer-relationship management technology, whatever that means.
Frankly, I didn’t care what they did or made. I just wanted to get in on the action. Friends had made thousands, even hundreds of thousands of dollars (on paper at least) on offerings such as AOL and Qualcomm. Not that Sideware was going to make me Warren Buffett under the most auspicious of circumstances-I had invested only what I was willing to lose without losing any sleep, approximately $1,000 for 100 shares.
Nonetheless, that modest sum didn’t prevent me from fantasizing. I envisioned Dr. Bean as the next Dr. Pepper-Big Blue in the bud. What was to prevent my stock from hitting $20 a share? Or why not $200 a share and splitting five or six times along the way?
In Sideware’s defense, they never did anything to stoke my expectations. Shortly after I purchased the stock, it went into a slow but unwavering death spiral. I suspected we were in trouble when I received their 2001 proxy statement. Listed among the year’s favorable developments was the appointment of Empower America’s Jack Kemp to their board.
On the alarming side came this bulleted announcement: “We are searching for a new Chairman/Chief Executive Officer for Sideware.” They didn’t add, “If you know anyone who’d be interested in the job, drop us a line,” but that was the impression I got.
And did this mean that Sideware was on autopilot at that point? As attractive and authoritative a talking head as I knew Jack Kemp to be from watching CNN and Fox News, I feared his presence alone on Sideware’s board wouldn’t be sufficient to turn us around.
The penultimate insult-the ultimate insult being the letter from my stockbroker-came a few months ago, when I was checking out my portfolio on AOL and discovered that Sideware had ceased to exist. The least the company could have done was to tell me, as a loyal shareholder, of their departure from this vale of tears before making their getaway. “No quote information is available for SDWS,” AOL stated bleakly when I tried to find a more complete obituary.
A few days ago, I googled Sideware Systems and learned that they hadn’t vanished completely: They’d merged with a Delaware corporation called KnowledgeMax. I decided to place a call to KnowledgeMax, the inventor of a “user-friendly … one-stop … Knowledge Resource Center,” according to their Web site. I wanted to ask their advice about whether I ought to sell my Sideware shares or hold onto them.
I’m not sure if it’s a good thing or a bad thing, but their investor-services guy picked up on the first ring.
If nothing else, it was reassuring when a live human-and a rather intelligent and cooperative one, at that-answered the phone at KnowledgeMax. He didn’t pull his punches, either. “We’re truly representative of the market for small tech companies,” he explained. “Everyone has been beat to death.”
Nevertheless, he went on, “we have traction in the market.” I had no idea what that meant, but I liked the way it sounded. I was frankly looking for an excuse to hang onto my shares, to keep the dream alive. “I can’t make any more forward-looking statement than that-given the nature of the market,” he added soberly. “We all learned a very valuable lesson in the last two years.”
My understanding was that when one company acquires another, they’re usually required to give them something in exchange-cash, shares, some of both. I mean, if KnowledgeMax had acquired Sideware Systems for, say, $5 billion, shouldn’t some of that cash trickle down to me? I’d made some good, unexpected money in the past when companies I owned were acquired by other companies. Of course, they were trading in things like oil and life insurance, not fantasy.
The investor-relations fellow (come to think of it, I should have asked whether he was also the C.E.O.) explained that the merger had been “a very complicatedprocess.” He suggested I “go into the S.E.C. documents” if I wanted to know more. I didn’t know how to go into the S.E.C. documents, and I was afraid to ask and betray my ignorance.
What were the company’s prospects? I inquired delicately. He told me that the Sideware software was “on the shelf right now. They may be licensed in the future.”
When I got off the phone with him, I was marginally more upbeat about my portfolio than I had been before, if only because I hadn’t been transferred automatically to voicemail. I called my broker and relayed the conversation I’d had with the KnowledgeMax guy, and asked him what to do. He checked out KnowledgeMax on his Quotron and informed me they were trading at a penny a share, give or take a cent.
My broker knew that I had another account with a different brokerage house, and he selflessly offered to transfer my Sideware shares there in order to avoid his company’s commission fee if I didn’t want my tech-stock adventure to end.
I think that’s what I’m going to do. I’d shoot myself if I sold my stock, then the market suddenly rebounded and Sideware’s Tagalong technology caught fire. By the way, the last time I checked, KnowledgeMax was trading at 2/100ths of a cent, down 5/1,000ths-or something like that-from the day before. But hey, that’s not half bad. You don’t want to know how my General Motors stock is doing.