Greenberg suggests that these two storage companies have similar products and similar revenues, thus the disparity between their market caps points to an overvaluation in Iomega. This disparity might have more to do with factors specific to Syquest, however, like the fact that it is not making any money on its competing product and has reported huge, unexpected losses two quarters running. Dow Jones and Dorfman Carmen Fleetwood of Dow Jones was next to write on Iomega, right after it pulled its secondary offering. Reasons were only made available today, in CEO Kim Edward's letter to shareholders. The stock got killed after they pulled the offering late Thursday because no one knew why, but there were some ugly allegations about accounting on the table upon which all eyes were fixed.
Secondary offerings require increased disclosure from a company, above and beyond the normal levels.
Whenever a stock offering is pulled, it immediately raises the question of whether or not the company is choosing to not have to disclose something. This could be as bad as monkeying with the numbers, since accountants have to go through them prior to the secondary, or as good as a takeover offer that the company is not prepared to make public. This seems ridiculous given that if the companies had really felt this way from the start, they never would have gotten involved with the offering. The secondary offering was supposed to remove Iomega's cash-crunch and alleviate the component shortage, but with its cancellation this is not going to happen, leaving Iomega to tap the debt markets again or find some other form of financing. If capacity constraint does not allow them to fulfill all of their orders, the resultant gap between supply and demand could conceivably be filled by a competing technology.