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Chapter 7 - The Secondary, February 3 - March 28, 2000 - Episode 11

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March 28 is the last day of the hackoff.com roadshow. The team is in Madison and then Milwaukee to visit with a bank, several large mutual funds, and the State Retirement Fund. The people they meet with are midwestern friendly and laid-back, but nervous. They are watching NASDAQ sink back below 4900 on their screens and don't pay full attention to the hackoff pitch.  Stocks which are up for the day show green on the screens and stocks which are down show red.

"I had to stop myself from looking at the screens," says Larry. "So much red."

"You didn't stop yourself from looking," says Donna. "I was afraid you were going to stop your pitch all together, you were going so slow."

They have just come out of a large bank downtown and are walking the few blocks to the Pfister Hotel where they have rented a room for the conference calls they need to officially price the hackoff secondary.

At 3:00 PM in Milwaukee — 4:00 PM in New York — Larry pushes the button on his cell phone to call the robot that will give him closing prices.  hackoff is down 11/16 and closed at 99 3/8.

"Shit," he says, "under 100 dollars. Our timing wasn't very good.  NASDAQ got clobbered."

Since secondaries are priced based on the market close, the conference calls from the rented room at the grand old Pfister, where hi-tech polycom phones look out-of-place, are pro forma. Barcourt recommends a price of 99 1/4.  Larry argues for 99 3/8 but surprisingly mildly. He calls the 1/8 below the closing price a "tip" for Semper — who did, after all, buy in the secondary.  He doesn't explode, though, and says he'll call his Board of Directors.

Franklin Adams and Joanne Ankers, along with Larry, are the Pricing Committee. Franklin is ten minutes late for the call so Larry, Donna and Joanne have to make small talk. Aaron Smyth is also waiting silently on the call.

"How was Houston?" asks Joanne.

"We're in Milwaukee," says Donna.

"I know that, Donna," says Joanne, "but I was asking about Houston. How was that?"

"Smelly.  Smelly and hot," says Larry after waiting to see if Donna will answer.

"I was born there," says Joanne. "Grew up there. My family still lives in and near Houston. It's really a great city."

"Right," says Larry. "Lots going on."

"How does the quarter look?" Joanne asks.

"Not done yet," says Donna.

"Are we going to make our numbers?" asks Joanne.

"We should have our operating profit," says Donna. "I don't want to be more specific than that. We're not closed yet."

"You must have a pretty good idea," Joanne insists.

"Joanne, I've been on the road nonstop for the last two weeks. I've told you what I know and I'm not going to tell you what I don't know. How does the Big Router quarter look?"

"That's not really relevant," says Joanne. "We'll do our earnings statement in a couple of weeks."

Franklin Adams has joined the call. "I keep hearing these rumors," he says.

"About hackoff's quarter?" asks Joanne.

"No, we're not famous enough yet for rumors," says Franklin. "I keep hearing that Big Router is having a hard time this quarter. I know that the Big Router salesmen are offering ad-Ventures' portfolio companies big incentives to buy before the end of the quarter."

"Speaking of incentives," says Larry, "Barcourt wants us to price at 99 1/4 so they can give a 1/8 tip to Semper and Fido."

"Is that what they said?" asks Joanne.

"Just recommended the price," says Larry. "Just don't see why we shouldn't price at the close except to help them with their favored accounts.  Antihack priced yesterday right at their closing price."

"Antihack is more complex with their debt issue," says Franklin. "I don't think they got quite what they were hoping on that. Larry, I'd say we should go with it. You guys have done a good job in a tough market. I think we're lucky to get done at this price even though we all hoped it would be higher. And, remember, the lower the price, the better chance the shoe goes — although an eighth doesn't really make a hell of a lot of difference."

"You think the shoe's at risk?" asks Larry in an elevated pitch.

"This market makes me nervous," says Franklin. "We should be okay, but the market is not well. Anyway, got to run. I move we price at 99 1/4.  Aaron, is that what we need legally?"

"I'll write it up with the boilerplate," says Aaron. "Is there a second?"

"I second," says Joanne.

"I'll hold my nose," says Larry. "If there's no dissent, I guess this passes unanimously. Thank you, everyone."

"Good work, Larry and Donna," says Franklin.

"Thanks," says Larry.

"One more thing," says Franklin.

"What's that?" asks Larry.

"You're rich," says Franklin. "Good night."

"Good night," says Joanne.

"Right," says Donna.  "Good night."

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