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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: DownSouth who wrote (3714)	7/13/1999 7:54:00 AM
From: Mike Buckley	Read Replies (2) of 54805

About Q's decision to issue more shares. I stand by my thinking that I don't have a huge objection to a 3% dilution. If the company is going to prosper to the extent I think it will, the dilution won't matter. Similarly, if the company does poorly, the dilution won't make matters worse. Not to any significant extent, anyway. The aspect of it that does get under my skin to a small extent is that we really don't know exactly why the dilution is justified by management. The press release said the increased shares will "partially meet needs of index funds." Ho hum. What does that really mean? Does it mean that management is attempting to lessen the volatility of the stock? If that's the case, we might see them deciding to move the stock to the Big Board. Any reason we come up with other than the one specifically stated in the press release is nothing other than pure speculation. The real issue for me is that the press release does indeed leave reasonable room for speculation when I would prefer that management be more forthright. In a similar but more puzzling situation, Citrix recently issued some convertible debt that, when converted, will result in about twice the dilution we're looking at in the Q's case. It was a private placement that raised about $400 million. It wasn't needed for cash flow. All of us who pay attention to the company are still wondering what the $400 million is going to be used for. On a completely unimportant note, :) this is NOT a secondary offering. A secondary offering is the sale of previously issued shares. The shares we are discussing will be newly issued. Describing stock sales of this nature as a secondary offering is a typical, every-day occurencce, but it is inaccurate to do so. --Mike Buckley

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