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Touchstone's Stock Buoyed by Anticipation : Finance: The Huntington Beach firm has a program that helps computers use Microsoft's new operating system.

August 24, 1995|GREG MILLER | TIMES STAFF WRITER

HUNTINGTON BEACH — The tsunami of hype surrounding today's release of Windows 95 appeared to be lifting the price of tiny Touchstone Software Corp.'s stock to dizzying new highs.

The Huntington Beach maker of programs that help computer users manage their machines watched its stock price soar more than 20% in two days, closing at $16.375 on Wednesday in heavy trading on the Nasdaq stock market.

The closing price was more than triple what the stock was fetching just seven weeks ago, before the company released a program that helps computer users prepare their machines for Microsoft Corp.'s Windows 95 operating system.

Analysts offered numerous explanations for Touchstone's sudden surge, but one thing was clear: Touchstone, which is preparing to sell 1.2 million shares of newly issued stock to the public within the next few days, appears poised to raise far more cash than it ever expected from the sale.

"They just fell into a gold mine," said Ben Murillo, an analyst at L.H. Friend, Weinress, Frankson & Presson Inc. in Irvine.

If Wednesday's closing stock price holds, Touchstone could raise about $20 million through the stock sale, nearly one-third more than the company hoped to raise when it issued a prospectus for the stock offering just a few weeks ago.

Six company officials who plan to sell 800,000 of their own shares in the offering have also seen their potential wealth grow. Larry Dingus, chairman of the company, could pocket $4 million by selling roughly one-fourth of his holdings.

It is no accident that Touchstone's rapid ascent this week coincides with the release of Windows 95, analyst said. The company's stock jumped after the release of its Win'95 Advisor software last month, and got another boost this week as investors gained confidence that the release of Windows 95 would not be delayed by software glitches or government antitrust action.

"There was always the suspicion that maybe, at the last minute, Microsoft would not ship this thing," said Jeff Kilpatrick, president of Newport Securities Corp. in Costa Mesa. "Now it looks like it's going to be hitting the shelves."

Touchstone's visibility on Wall Street has been enhanced by its ties to Windows 95, analysts said, but also by information provided to potential investors in advance of the upcoming stock sale.

The company, which posted net income of $800,000 on revenue of $7.2 million last year, has mailed dozens of prospectuses explaining the stock sale to investors, and Touchstone officials have been touring the country in recent weeks, answering investors' questions about the offering.

Because Wall Street's appetite for high-tech stocks has been all but insatiable for much of this year, investors could be bidding up the price of Touchstone shares because they believe they won't be able to get enough of the stock through the offering, analysts said.

"One of those large [mutual] funds alone could use half a million shares," Murillo said. "If tech stocks weren't making new highs every day, it might be unusual to see this happen."

Regardless of the explanations for Touchstone's rocketing stock, analysts cautioned that the company now carries a market valuation that vastly exceeds shareholders' equity in the company, which comes to about 44 cents per share based on total shares outstanding.

"I'm sure with Windows 95 they'll sell a heck of a lot of programs," Kilpatrick said. "But you have to be a truly risk-oriented investor to be buying this stock at $15 or $16 a share."

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Stock Surge

The stock price of Touchstone Software Corp. has more than tripled in less than three months. Weekly closing stock prices:

Wednesday's close: $16.375

Source: Dow Jones; Researched by JANICE L. JONES / Los Angeles Times

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