Be careful of ARCC on Friday!
From Briefing.com:
Allied Riser Communications (ARCC) The deals are getting more aggressive by the day... In Allied Riser's case, the company posted revenues of $212,000 for the entire year, bled more than $15 million, yet is asking investors to front them in excess of $250 million in cold, hard cash. And, this isn't even an Internet deal. At the conclusion of the company's 14.75 million share offering, the provider of broadband data and voice services to small- and medium-sized businesses will sport a market-cap of more than $1 billion and a Price/Sales ratio of approximately 1500 times trailing top-line... Allied Riser generates its meager revenue stream from selling broadband data, video and voice services to tenants in buildings in which the company owns and operate fiber-optic networks. The company enters into long-term relationships with the building owners, who in return receive a cut of the revenues. Allied Riser's largest shareholder is EGI-ARC Investors, an outfit that is run by Chicago real estate mogul Sam Zell. At present, Allied Riser is relying on its affiliation with Mr. Zell to open doors. But once the company exhausts this considerable resource (i.e. they run out of Zell-owned properties in which to install fibre), it will be forced to compete with the likes of AT&T, MCI WorldCom, Sprint, Qwest, Level 3 and GTE Internetworking for business... The reason for the negative slant to this story is to emphasize the inherent risks to investing in early-stage telecom companies. While a number of these deals have worked out for investors, there have been many that haven't. |
