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New Economy: Know when to hold 'em
Thursday, July 13, 2000 By Ken Zapinski, Post-Gazette Business Columnist
We've all dreamed, at one time of another, of catching a hot tech stock and riding it to riches.
But what if your rocket takes off, and you're not aboard?
To put it another way:
Who would have thought that Tollgrade Communications, the small Cheswick company that makes telecom testing equipment, would become the darling of the Nasdaq, climbing more than 650 percent since Jan. 1 while much of the tech sector was sliding?
Not the executives at Tollgrade, that's for sure.
They left millions and millions of dollars on the table by selling shares this year before the stock's meteoric rise.
OK, so it's tough to feel too sorry for these folks. We're really only talking about the difference between "wealthy" and "really rich." And the numbers wouldn't turn any heads in Silicon Valley.
But for Pittsburgh, they're staggering.
Consider CEO Chris Allison. During January, February and May, he sold a total of $4.25 million worth of stock. Last week those same shares were worth $17 million.
(The results are based on last week's closing price of $130 per share and take into account Tollgrade's 2-for-1 stock split in March. The sales data comes from First Call/Thomson Financial.)
Neither Allison nor anyone from the company would comment, a spokesman said. But I know Chris a little.
The 39-year-old former public relations executive became Tollgrade's chief operating officer in 1992 as his wife was diagnosed with breast cancer, his father's heart was failing and the company was late getting its product to market. He weathered the death of his father, the company's founder and chairman, two years ago. I suspect Chris doesn't give too much thought to that missing $13 million. But odds are some others aren't too pleased.
Besides being the chairman and chief executive of the investment house of Parker/Hunter, Robert W. Kampmeinert is also a Tollgrade director. He sold 3,000 of his shares in February. The stock has only gone up, oh, 260 percent since then.
"That's why I've very pleased I only sold 5 percent" of his Tollgrade holdings, Kampmeinert said, explaining that the sale was part of an asset reallocation in his portfolio.
We're talking small change for these people at the top of the pyramid. Allison, after all, still holds shares and options worth nearly $50 million. But other folks may have missed out on a life-transforming payday.
Joseph O'Brien, the 41-year-old personnel chief, made $1.06 million exercising stock options over the last eight months during the narrow windows when company insiders are permitted to trade their stock.
Not a bad haul for a guy who's previous job was as a program coordinator for Goodwill Industries. But it's a far cry from the $4.4 million those options would have been worth last week.
Roger Smith, 40, the senior vice president of engineering, made nearly $1.5 million on sales since January. But those shares would have been worth $5.2 million had he held onto them.
And even the chief financial officer has been squeezed by the numbers. Samuel C. Knoch netted $541,000 in February on options that would have been worth $2.8 million.
Tollgrade's lightning run up the Nasdaq can't last. Or can it?
Shares had slumped in recent days in advance of last night's earnings announcement. But after trading ended, the company announced that it had nearly tripled its earnings per share in the second quarter compared to last year. That makes the third consecutive quarter when the company did that well, or better.
But with this sort of overheated stock, what kind of fantastic results are good enough?
Zapinski, an editor with post-gazette.com, writes weekly on the New Economy and can be reached at kzapinski@post-gazette.com or 263-1614.
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