Spectrum Holybyte (SBYT): CIV II is the NEXT MYST! Message Board

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Technology Stocks : Spectrum Holybyte (SBYT): CIV II is the NEXT MYST!

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To: Thomas Dremel who wrote (116)	10/3/1996 4:26:00 PM
From: Andrew Chow	of 124

>the down side is they go belly up For the reasons I mentioned in my message #111, I disagree. The risk is clearly large - larger than that for an industrial blue chip. From the current price of 7 1/2 to bottom value of 5 (my value) is a drop of 33%, quite large for a large cap stock. If someone hasn't reconciled themselves to a reasonable chance (I say 50%) of this happening then they're fooling themselves. But as I said, I view the upside as substantially larger - and that's w/o a takeout bid. I think you would be better served to consider why the market will value SBYT at $5 even if it fails to make money over the next 2-3 quarters. My analysis is solely based on fundamentals - I think charts are the equivalent of vodoo dolls. Consider that in June of this year SBYT floated around the $5 area. This was after the release of a couple of highly touted titles (Star Trek & Top Gun) that utterly failed to eliminate SBYT's losses in the past 2-3 quarters. Market expectations were that the next two titles (Civ2 & GP2) would also be unable to make the firm profitable. The firm had negative net worth and got barely enough cash to survive via a private placement of convertible preferred. In other words it was in pretty much the situation you are positing for the downside case for SBYT today. The stock carried a $5 rather than $0 value because of the run-off value of its older games and value to a new developer of its licenses and upgrades. Now shift to today. If anything with the success of Civ2 & GP2 the run-off value of its existing library of games has increased. SBYT has also been awarded the license for the next major Star Trek release (Final Contact). The prospective cost to a new developer to complete titles such as MOO2, Magic and X-COM3 has also decreased. Consequently the residual value of SBYT's properties (in event of firm liquidation) is higher today that it was in June. Hence my view that the fundamental value of SBYT in the downside case must be at least that at which it traded in June, ie. about $5.

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