November 1, 2001
Online credit-card banker NextCard, until recently a darling of Wall Street analysts, is seeking a buyer after its shares plummeted 84 percent following widening losses.
NextCard also disclosed that it is now considered "signficantly undercapitalized" by the Office of the Comptroller of the Currency, requiring it to cut back on loans and take other steps to improve its finances.
The company said it will immediately tighten its underwriting criteria, suspend originations of secured credit cards and reprice many of its programs, all while operating under tightened federal scrutiny.
Just a few weeks ago, NextCard rival Providian's stock took a nosedive as Wall Street lost confidence in its business plan, which focused on the "subprime" lending market.
It wasn't long ago that Wall Street analysts were hailing NextCard as one of the few Internet ventures with a future.
"This is a company that is really growing through all the noise," said Stephen C. Franco, an analyst at U.S. Bancorp Piper Jaffray. NextCard's use of targeted ad banners makes other direct marketers "look like the Flintstones chiseling an offer out of stone," Jim Nail of Forrester Research told The Wall Street Journal last January
As recently as July, NextCard's stock was climbing while its rivals' sank. "This is the most fundamentally undervalued stock that I cover," an ebullient Allison Thacker of RS Investments in San Francisco told the Journal.
Based in San Francisco, NextCard has about one million accounts, far fewer than the traditional companies, but it is credited with signing more accounts through the Internet than any other company. Its Web site gets more than four million visits per week and is ranked among the top business and financial sites.
