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Technology Stocks : Wind River going up, up, up!
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To: Mark Brophy who wrote (901)4/22/1997 2:37:00 PM
From: JB   of 10309
 
WIND no buy back / no way

WIND will not buy back shares in the open market. For a company like WIND it would make no sense unless the stock was significantly under book value. Companies like WIND try to attract institutional buyers who will become long term holders of their stock. Besides doing fundamental analysis before buying a security a mutual fund will look at a companies trading characteristics. Specifically they will look at a companies float. The float is simply the shares that are freely traded on the open market. If I was a fund manager ideally I would want to buy a company that I could buy a total position with out effecting their market price. If a large small cap fund wanted to buy a 1% position in WIND that might mean a purchase of 100,000 thousand shares. If you went into the market right now and tried to buy 100,000 WIND you might drive up the price $5 or $6 dollars. If you bought 100,000 IBM the price may jump 1/8. The fund manager would have to buy or sell WIND over several days to get a "full" position. The last thing WIND would do is buy shares and reduce the outstanding float. Mutual Funds would have to unload their shares because they would lose their liquidity. If they needed to exit WIND immediately the shares would be crushed. Therefor as WIND matures we will see additional stock offers and splits.

Lastly, the key to a companies current stock value is the discounted value of WINDs future EPS. If WIND was going to earn $1 dollar a share this year and $5 dollars next year and XYZ company was going to earn $1 this year and $2 dollars next year would you pay the same amount to own each company.
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