Two thinly traded companies started by broker Nathan A. Chapman Jr. have suddenly become hot stocks, and yesterday they each soared at least 25 percent.
Shares of Chapman Holdings Inc., a Baltimore-based brokerage and investment banking firm, jumped 32.7 percent, or $4.375 per share, to a high of $17.75 at the 4 p.m. close.
Shares of Chapman Capital Management Holdings Inc., an investment management company, climbed 25 percent, or $3.75 per share, to a high of $18.75.
In the past 2 1/2 weeks, the shares of both companies have rocketed 689 percent from their lows, Chapman Holdings zooming from a 52-week low of $2.25 on Dec. 8 and Chapman Capital rising from its low of $2.375 reached Dec. 6.
"It hasn't been very easy to keep up" with demand, said John R. Boo, head of Nasdaq trading at Ferris, Baker Watts Inc., who makes a market in the stocks. "I am having a hard time finding sellers."
Volume in both stocks was heavy with 49,800 shares of Chapman Holdings, and 52,700 shares of Chapman Capital being traded yesterday. Chapman Holdings' recent average daily volume has been 6,216 shares traded, while Chapman Capital's average volume has been 10,690.
But yesterday's volume paled compared with the 215,400 shares of Chapman Holdings that exchanged hands Dec. 12, and the 264,400 shares of Chapman Capital that traded Dec. 9.
Chapman Holdings had 2.95 million shares outstanding as of Sept. 30; Chapman Capital had 3.35 million shares outstanding.
The surges in volume and share price are unusual for these companies, which are not followed by analysts and on some days do not trade at all.
Boo, who has been in the brokerage business for about 16 years, said he has "never seen anything like it."
"It is pretty bizarre," he said. "Three weeks ago, I couldn't get an order, couldn't find a bottom-fisher. Now, 20 bucks?
"Not that stocks don't make moves like this," Boo said. "But never after they have been so profoundly unloved."
The sharp increase in activity comes about three weeks after eChapman.com filed a registration statement with the Securities and Exchange Commission for an initial public offering. The company plans to raise as much as $53 million by selling 3.3 million shares at $14 to $16 per share. The offering is expected to close late in January.
In conjunction with the offering, Chapman Holdings, Chapman Capital and Chapman Insurance Holdings Inc. have agreed to merge into the new company. Chapman declined to comment because eChapman.com is in the SEC's quiet period.
Chapman has been on the road since the November announcement, talking with investment managers about the new company and its strategy.
In January, executives are scheduled to talk with investment managers in 10 cities, including New York, Boston, San Francisco and Dallas, according to Chapman Co.'s Web site.
Chapman's newest venture is designed to take "advantage of the unique opportunities presented by the growth of the Internet," according to the company's prospectus.
It plans to offer brokerage services, mutual funds and insurance products online. It also plans to operate an Internet bank and offer a variety of lifestyle, educational and cultural content to appeal to African-Americans, Asian- Americans, Hispanic-Americans and women.
The prospectus notes that there are "risks" associated with the new company. It has no Internet-related operating history, and Chapman Holdings, Chapman Capital and Chapman Insurance had total net losses of $1.6 million on revenue of $7.4 million in the nine months that ended Sept. 30, 1999, and net losses of $1.59 million on revenue of $6 million in the year ended Dec. 31, 1998.