PSINet Inc, the internet service provider that is the subject of takeover rumors about once every quarter, saw its time come round again yesterday, when its shares rose broke through their 52-week high following the publication of its second quarter results on Wednesday. The stock closed up $3.3125, or 20.8% to close at $19.25. PSINet’s average daily volume is a meager 969,681, but yesterday 18.7 million shares were traded. The performance brought it onto the list of the top ten most active Nasdaq stocks in terms of volume for perhaps the only time in its existence. Those numbers, while slightly better than expectations, were not the stuff to get too excited about, so there were clearly other factors at work. One possible factor was the coverage initiation by Donaldson, Lufkin & Jenrette (DLJ) with a strong buy recommendation, saying that $25 is a fair price for the stock at the moment, based on five times the previous quarter’s revenues, on an annualized basis. Another one was being dragged up on the coattails of Mindspring Enterprises Inc, another ISP whose strong numbers Wednesday night resulted in yet another sharp rise in its stock, closing up 6.2% at $149. However, Mindspring is mainly a consumer ISP, whereas PSINet is a pure corporate play, so that is less likely. Maybe in these days of hyper-valuations of companies with flaky assets, a more solid-sounding company like PSINet, despite having lost money for years suddenly looks attractive, especially at this price and it is known to have been the target of ISPs and telcos in the past. Bloomberg cited the obvious suitor, AT&T Corp as being behind the rise.
