K-Tel International Inc., the marketer of entertainment products in Los Angeles that has made headlines with its rocketing stock price, signed a programming agreement with Guthy-Renker Corp.'s GRTV Network this month.
The network, which airs DRTV programming to 35 million cable homes and to satellite dish owners, will begin in June broadcasting a daily half-hour music show promoting K-Tel music products. The companies are also evaluating possible co-marketing joint ventures together.
All K-Tel programming broadcast on GRTV Network will promote “K-Tel Express,” the company's online music service which launched May 1 and was considered the primary reason for the company's stock surge.
“We're now being valued as an Internet company,” said David Weiner, president of K-Tel, while attending the DRTV Expo in Long Beach, CA.
K-Tel's stock surged from 6 5/8 on April 8, when its total market capitalization was about $25 million, to a high of 78 15/16 on May 5. What was considered amazing to some stock observers is that more than 70 percent of K-Tel's 3.8 million outstanding shares are held by Philip Kives, K-Tel's chairman and founder.
Helping to boost the stock was a “strong buy” recommendation from investment newsletter Stock Investor Trading News, which set a target price of $100 a share with the gushing commentary, “we have reviewed K-Tel's new 'K-Tel Express' Web site and remain highly confident that K-Tel will indeed be a serious competitor in the burgeoning online music retail industry.”
That opinion has been met with countervailing opinions that the stock is due for a crash when it is no longer buoyed on Internet hype. K-Tel conceded on May 8 that its Web site operations would require a “substantial increase” in funding from the initial $343,000 it paid to compete with other online music retailers, including CD Now Inc. and N2K Inc. K-Tel posted a net loss of $952,000, or 12 cents a share for its third quarter ending March 31, as sales shrank 11 percent to $16.4 million.
About $900,000 in losses were attributed to the scrapping of its DRTV media buying operations in March. At that time, the company said that it would focus on developing new products to market through DRTV channels instead of buying media.