Convinced it needed to explain its venture capital business to Wall Street better, Chase Manhattan Corp. took to the stump early this year, providing analysts their closest look ever at the details of the unit's portfolio of investments.
At the time, it seemed like a good idea. But a tumultuous couple of weeks for technology stocks turned that effort on its head.
Analysts now seem as perplexed as ever about how venture capital activities will affect Chase's earnings. An informal survey produced estimates of first-quarter income for Chase Capital Partners ranging from $750 million down to $100 million.
Even worse for Chase, said some analysts, is that the company now faces the task of being judged, period in and period out, for its venture capital performance.
By opening the books to scrutiny in a way other privately held venture capital firms do not, Chase executives are running "the risk that they would have to manage their portfolio more aggressively" with an eye to quarterly earnings, said George Bicher, an analyst at Deutsche Banc Alex. Brown.
This is not what Chase had in mind when, in presentations to analysts and investors earlier this year, it detailed the makeup of the portfolio and the identities of the 67 or so investments it holds that are already public securities.
Armed with that knowledge, "all of us promptly set up spreadsheets and plugged them into the Quotron," said Lawrence Cohn, an analyst at Ryan Beck & Co.
The trouble, analysts said, is that this is only one part of the equation. Not until earnings are released does Chase disclose how much of its holdings it sells off during a given period.
Another tricky part, analysts said, is estimating gains Chase may have made on private investments, which make up the bulk of the portfolio. Publicly traded securities were a small part of the 575 companies represented in the portfolio.
"There is not a lot of transparency in that respect," said Ronald Mandle, an analyst at Sanford Bernstein.
"They gave us all just enough information to make us all dangerous," Mr. Cohn said.
A spokesman for Chase declined to comment.
Chase's strategy was to get the Wall Street community to consider the value of Chase Capital Partners in the hopes that the business, with strong ties to the fast-growing New Economy, would boost the bank's stock. But the strategy could also backfire, especially when, as at the end of the first quarter, the New Economy stocks are in decline.
The differences among the analyst estimates are indeed related to the late-quarter decline in the Nasdaq stock market. While it was less dramatic than this week's market action, many analysts believe it dampened the performance of many of Chase's individual holdings.
An analysis by David Hilder, an analyst at Morgan Stanley Dean Witter & Co., put the value of Chase's holdings in publicly traded companies at $4.2 billion at quarter's end. Taking into account a discount Chase applies to the portfolio, that would amount to a gain of $37 million, according to Mr. Hilder. He estimates that, with gains in the private portfolio, Chase would gain just $100 million in the first quarter, a far cry from the fourth quarter, when Chase Capital Partners reported an eye-popping gain of $1.3 billion.
The value of Chase's holdings in Cobalt Networks Inc., a Mountain View, Calif., maker of Internet server applications, dropped 57% from the end of December through the end of March, to just over $115 million, according to Morgan Stanley research. The value of holdings in iXL Enterprises Inc., an Atlanta-based Internet applications developer, dropped 50% during the period, to $222.32 million.
Meanwhile, Chase's holdings in Telecorp PCS, an Arlington, Va., affiliate of AT&T Wireless, rose 32%, to $650 million, and holdings in American Tower Systems, a Boston-based wireless communications firm, rose 70%, to $309 million.
On Monday, Mr. Hilder lowered his per share estimate for Chase's first quarter earnings by five cents, to $1.45, reflecting "a late quarter slide in estimated gains on public securities held by Chase Capital Partners," he said in his research report.
Mr. Hilder said in an interview that "over time more information is better. Unfortunately the most recent quarter-end changes in values reflect a decline in tech stocks." Mr. Hilder added that his calculations do not assume that Chase sold big parts of its holdings during the period.
The per share consensus of Wall Street was $1.54 Thursday. As with other banking companies, Chase is expected to report robust results from wholesale banking and capital markets activities for the period.
Lehman Brothers analyst Diane Glossman said she thinks Chase Capital partners will turn out to have gained $750 million in the period. "It looks pretty good," she said, while acknowledging that the estimate is just "our best guess."
Mr. Bicher has estimated gains of $600 million. Mr. Cohn and Mr. Mandle have estimates of around $400 million, which is close to the three-year average.
Some market watchers don't even try. Steven Eisman at CIBC World Markets Inc., has an estimate of $1.49 per share for Chase, but not one specifically for Chase Capital Partners. "It used to be hard" to estimate the unit's performance, he said. "Now it's even harder."