NOTE: Approximately $10.6 million of the net loss for the first nine months of 1999 was the result of non-cash charges.
How often are we going to have these huge non-cash charges? Anyone know the details on this one? Only thing I can think of is executive compensation plan options, but we weren't up in the 18's at the end of the third quarter, and the first quarter closed above 11, so the market cap didn't increase by *that* much.
10.6 MM out of not 16.4 in expenses this year... that's almost 2/3 of our total expenses for these "non-cash charges..." Without these "non-cash" charges, our 9 month earnings would only be (0.17) instead of (0.47). Huge difference.
Of course, with 41.4 million shares out there (dividing Yahoo market cap by closing stock price) the change in market cap this year (roughly from 2 to 18 so far) has been $662 million. Since the execs get 2% of that, that would be $13.2 million in compensation... hmmm. Not much more than the $10.6 million non-cash charge.
Let's say the stock ran to 100... the market cap change would be
$3.4 Billion, which would mean IATV would have to pay the execs $68 Million in non-cash charges for their compensation. Perhaps that's justly earned if the stock runs up that much, but at some point, the market's gonna want to see this thing make a profit, and I don't see us doing $68 million in revenues until well after we hit $100 in stock price.
If the stock runs to 100 and everyone here makes 50x their initial investment, I don't think anyone is going to care if the execs pocket $68 million dollars (not counting the stock they own and their stock options). They'll be wealthy folks because it was their idea. However, unless they change their compensation plan so it's not tied to market cap (ie they issue normal stock options) the compensation and associated non-cash charges are going to be a collar on this stock.
SO, my official advice, not that anyone is going to listen, is to hold the stock long until the quarter in which we have our next big run up. May be 4Q probably will be next year some time. Then whatever you do, do not hold the stock the day earnings are announced. Sell 2 days before hand. Earnings will come out, the stock will drop due to the huge non-cash charge, then you can buy back in the next week and ride the stock up again. Seems like a no-brainer to me.
-Mike |
