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A Different Yardstick For Montgomery


Readers Report

A DIFFERENT YARDSTICK FOR MONTGOMERY

While we appreciate the fact that the results we have achieved for our clients and the growth we have experienced have brought us to your attention, we were disturbed to note important inaccuracies in your article "Montgomery: Too much, too soon?" (Finance, Oct. 23).

The article maintains that Montgomery's average return on initial public offerings since 1990 is "only a little better" than the 63.5% return of the Standard & Poor's 500-stock index during the period. The correct calculation demonstrates that Montgomery's average IPO return--77%--is triple the return of the S&P--27%--during the time period BUSINESS WEEK cites.

You also relate that the Montgomery Growth Fund's performance was "only 21% in 1994" but fail to note that it was the No.1 growth fund in America. Additionally, you disparage a conference that you did not cover, quote one anonymous person who did not attend it, and refer to "brokers" who were not even invited to it.

Troubling as well is the article's implication that Montgomery paid "more than $7 million plus stock and warrants" in class action legal settlements. In fact, the aggregate of all payments made by us in these cases since the firm was founded more than 25 years ago is less than $250,000; and then only where the cost of settlement was less than the anticipated cost of defense.

Overall, this story does not support its thesis. Our true record on behalf of our clients is a far better measure of our success.

Thomas W. Weisel

Chairman & CEO

Montgomery Securities

San Francisco

Editor's note: While there was nothing inaccurate about the methodology that BUSINESS WEEK used to compare Montgomery's IPO performance with the Standard & Poor's 500-stock index, we agree that Weisel's approach is superior. Our table, which mislabeled the time frame, listed figures comparing IPO performance through Oct. 9. Using that time frame (rather than the one cited in Weisel's letter), the value of Montgomery's IPOs rose by 68%, according to Securities Data Corp., while the S&P 500 index increased 31.2%.

The $7 million-plus in stock and warrants mentioned in our article referred to the total settlement with all the targets of the class actions, not just Montgomery. BUSINESS WEEK did not intend to imply that Montgomery had paid any specific amount to settle these cases.

Your article unfairly paints one of America's greatest entrepreneurial success stories as a bunch of hot-money cowboys. Nothing could be further from the truth.

Montgomery took our company public more than six years ago. Two of Montgomery's three bankers on our original IPO team are still there, as is their nationally recognized analyst who follows our sector. Not one of the 10 or more other investment firms we have dealt with over the years could make a similar claim.

Since that time, I have served on the board of directors for one public and two private companies that have employed Montgomery's services, and each of the CEOs shares my gratitude to Montgomery for helping make our successes possible. To date, no investor has been damaged, for its due-diligence practices are among the most disciplined in the market.

Thomas G. Stemberg

Chairman & CEO

Staples Inc.

Framingham, Mass.


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