WDC/Sandisk Corporation Message Board

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Technology Stocks : WDC/Sandisk Corporation

WDC 174.21

+6.9%

Nov 10 3:59 PM EST

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To: Ausdauer who wrote (9230)	2/19/2000 5:20:00 PM
From: Craig Freeman	Read Replies (2) of 60323

Ausdauer, your summary of the Lexar filing inspired me to read it in detail. My first impression is that the IPO was designed to bail out their big investors and management. Lexar has gross margins half that of SNDK and is losing money on every product they sell. This business model may work for Internet companies but it's a sure way to bankruptcy for a hard goods supplier. They have $50M+ in "mandatorily redeemable" preferred shares which they are required to buy back over time. Assuming that Lexar can stall SNDK long enough, they will raise $80M from the IPO and ship the proceeds out to buy back these shares. Lexar's board is also empowered to declare dividends on the preferred shares and to issue more preferred shares without shareholder consent. On top of that, everyone and his brother has warrants and options on the common stock. For example, "On June 5, 1998, Mr. Estakhri purchased 1,076,284 shares of our common stock at a purchase price of $0.08 per share." 8 cents! IMHO, on paper Lexar shares represent a terrible investment. But, despite all the warnings and risks, the IPO market is so hot that Lexar's offering will probably be oversubscribed and experience a record first-day pop. Craig

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