HEALTHEON/WEBMD: Company Directors Pledge a $220M Investment
Hoping to "restore confidence in a stock that is trading near its lowest level ever," two Healtheon/WebMD board members pledged Friday to invest $220 million into the online health services company. John Doerr, financier of Netscape and Amazon.com, has promised an investment of $20 million, while Jim Clark, Netscape founder and WebMD co-founder, has promised up to $200 million. "These two are fairly household names in the financial community," John Souter, health care analyst for William Blair & Co., said, adding, "The amount of money that they're stepping up makes me believe that it's more than a PR move -- that it's a vote of confidence that this company is in a leadership spot." Clark reaffirmed his commitment in a statement, saying, "I am more confident than ever in Healtheon/WebMD's vision of connecting physicians, payers and consumers via the Internet." Investors reacted kindly to the proposal, boosting the company's stock 35%, to close Friday at $29.19. The announcement was designed to screen company losses of $0.50 per share for the first three months of the year -- higher than the $0.47-per-share projected loss. In May of 1999, Healtheon stock had peaked at $125 a share, but dropped to an all time low of $15.63 earlier last week. Despite the firm's recent bounceback, some analysts warn against making hasty predictions. Stephen DeNelsky, analyst for Credit Suisse First Boston, cautioned, "The directors' show of confidence helps, but Friday's bounce in Healtheon/WebMD stock must be backed up by impressive revenues and manageable losses when the company reports its final first-quarter earnings" expected in late April or early May. He added, "I don't think you can read too much into a one-day movement of the price" (McClam, AP/Austin American-Statesman, 4/8).
Losses Still Hurt
Despite the jump in Healtheon stock, mutual fund company Janus Capital is still feeling the sting from the Internet's 53% drop in stock since it first purchased 15 million shares back in January. Initially buying the stock at $62 per share, Janus faces a paper loss of more than $492 million. According to the Wall Street Journal, the fiscal damage felt by Janus "underscores how much 'extreme' investing in Internet stocks can pose extreme risks" (Lucchetti, 4/10).