Error Has Tech Stock Sinking Fast

For Richard Jacobs, it was “a moment of terror.”

Jacobs, a technology analyst at Janney Montgomery Scott in Philadelphia, stared at his computer screen in shock Thursday morning: HTE Inc., an Orlando, Fla.-based software firm whose stock Jacobs was recommending, had seemingly lost half its value overnight.

The stock opened at $15 on the Nasdaq Stock Market on Thursday, apparently down $13.13--or 47%--from Wednesday’s close.

In panic, Jacobs called HTE headquarters but couldn’t get through. “The company was pretty much in tumult,” he said.

But to the relief of Jacobs, HTE and its shareholders, it was all just a mistake.

Nasdaq had erroneously adjusted the price for a 2-for-1 stock split that actually doesn’t take effect until next Friday.

When it realized its goof--”a human error,” a spokesman said--Nasdaq halted trading for more than two hours while it put out the word to investors in a press release accepting the blame.

Meanwhile in Orlando, HTE’s chief financial officer, Susan Falotico, was trying to cope with a morning-long flood of phone calls from anxious investors.

“Big holders, little holders--everybody was calling,” she said Thursday afternoon, after things had calmed down. “Our biggest concern was that people didn’t think we’d somehow lost half our value.”

HTE is no tiny start-up. With 450 employees and $56 million in sales last year, the 17-year-old firm is a leader in its niche of developing computer programs for municipalities and public utilities.

It went public in June 1997 at an initial price of $11 a share and reached a high of $35.75 last month before slipping recently in the market-wide slump in high-tech issues.

After a trading halt of two hours and nine minutes Thursday, the stock reopened at 12:20 p.m. at a corrected price of $28. And despite all the excitement, the stock finally closed at $28.13, unchanged--not a bad showing on a day when the tech-heavy Nasdaq index was off more than 1%.

What of the lucky bargain hunters who gobbled up 10,900 shares of HTE at half price before the error was recognized?

Sorry. The 17 pre-halt trades were rescinded, Nasdaq spokesman Reid Walker said.

The mistake was extremely rare but not unprecedented at Nasdaq, which accurately handles hundreds of such adjustments daily, Walker said. The last time Nasdaq jumped the gun on a stock split was six years ago, he said.

Analyst Jacobs at Janney Montgomery still loves HTE, but he noted wistfully: “At $14, it would be a historic steal.”

In an odd way, the stock might benefit from the mishap, he said.

“There are a lot of high-tech names out there,” said Jacobs, “and in a market like this anything that attracts attention is a positive.”