Shares in the CBT software group have soared on the Nasdaq market for the second successive day after the group revealed that former chairman, Mr Bill McCabe, was to return as chairman with Mr Greg Priest taking over as chief executive officer.
The shares jumped $2.50 (£1.67) on Wednesday to $12.42 in heavy trading even before the announcement of Mr McCabe's return and the purchase of the Knowledge Well software company for $52 million (£35 million).
But that share turnover on Wednesday paled into insignificance compared to trading in CBT on Nasdaq yesterday when more than four million shares traded within an hour of the opening bell, twice the average turnover for a full day.
That unprecedented trading continued throughout the day and, by the close on Nasdaq, CBT shares were up $4 1/2 to almost $17, a rise of 36 per cent on the day. Turnover was more than 16 million shares, compared to the average daily turnover of 2.4 million shares.
Mr McCabe, Knowledge Well's chairman, will take back the chairmanship of CBT. Mr McCabe, who previously served as CBT's chief executive, intends to make a significant purchase of CBT shares, the company said. Mr McCabe sold more than $40 million worth of CBT shares last year and any buying by him will be seen in the market as an indication of his own confidence in the company's future Mr James Buckley was hired by CBT in August to succeed Mr McCabe, who continued as a member of the CBT board. Mr Buckley resigned in October as chairman and chief executive after a profits warning led to heavy selling of shares from a high of $63.87 to a low of $6.72, and a loss of investor confidence in the CBT management.
Even after yesterday's rise, CBT shares are still a long way off their high. Analysts said yesterday's strong gains also seemed to involve momentum investors who sense a recovering share price as well as a belief in some quarters that Mr McCabe's return as chairman will trigger a recovery. These are the same investors who sent the CBT share price tumbling earlier in the year.
Wall Street analysts also welcomed the acquisition and the boardroom appointments - with two upgrading CBT to a "buy" - and set a six-month price target of $18 for the shares.
"We are raising our rating to buy from long-term attractive as CBT welcomes back four key members of its management team and announces that it has acquired Knowledge Well, a provider of interactive courseware for business skills training," said analyst Mr Howard Block.
"We believe there will be immediate economic value added. To account for the additional amortisation expense associated with goodwill from the acquisition, we have lowered our earnings estimate to 28 cents from 40 cents for 1999." Mr Block believes that having key management members back in the fold will enable the company to address key fundamental issues which include refocusing the sales force on revenue recognition and capturing the small and middle market customers. "The earnings multiple will not return to its loftier levels but even with a multiple expansion approaching the other members of the group, we anticipate substantial upside for the stock," said Mr Block. CBT is buying Knowledge Well for $52 million in stock and, under the agreement, it will issue 4.8 million shares for all of Knowledge Well's outstanding shares and options. Mr McCabe has predicted that if the acquisition is approved by shareholders, the move could see staffing levels increase by 200 at Knowledge Well's facility at Dundrum in Dublin.
In addition to Mr Priest, two executives who left CBT Group earlier this year are also returning to the management team. Mr Bill Beamish has been named executive vice-president for product strategy and Mr Jeff Newton will serve as executive vice-president for global channel sales.
Knowledge Well, which was founded by Mr McCabe after he resigned as CBT chief executive in 1996, differs only slightly from CBT in its activities.
