GST Telecom (GSTX) 4th quarter earning Message Board

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Technology Stocks : GST Telecom (GSTX) 4th quarter earning

GSTX 0.000300

0.0%

Oct 30 2:51 PM EST

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To: Doug Bean who wrote (318)	3/11/2000 4:16:00 PM
From: Obewon	Read Replies (1) of 369

Posted this over on Yahoo! in response to a question on whether the actions we have seen over the past month reflect an accounting problem or an acquistion. Answer to question by: valuationguy 3/11/00 4:07 pm Msg: 5682 of 5682 Here are several key to figuring out this puzzle. While your scenario is possible, it is not likely due to the personal liability of the BOD to shareholders. The BOD cannot cover up, hide or delay an announcement of fiscal impropriety by management without opening up the Company and each individual member of the BOD to full liability for all shareholder loses between when the BOD knew of problems and when they tell the market. Therefore, you can be pretty assured in assuming that the members of the BOD will act in their own best interests. Another fact to consider is that a "strategic" audit is NOT the same thing as a "financial" audit. The term "strategic" has several connotations when you are trying to establish the value of a business. (I value private businesses for a living so I should know!) It usually refers to what is the value of a company or asset to a specific entity. The value of a business to a financial buyer is usually much less than the value to a strategic buyer who can establish some cost or revenue synergies, thus increasing the cash flows of the business over what a financial buyer could achieve. By restructuring the Company and selling off non-operating assets before the deal is finalized, the BOD is strengthening its justification in demanding a higher price. Looking at it another way. If I am an investor and your business is worth $45 to a financial buyer but I can indentify specific expenses that could be eliminated raising the worth of your business to $50, what should I pay for your business? Currently, $45 is what I would want to pay because the added $5 is a result of my efforts not yours. You should be willing to sell for $45. But if you know that I can wring out an additional $5 worth of costs out of the business, you would probably want some or all of that "synergy" value. Furthermore, let's say you know which expenses I am likely to cut to squeeze out this added value. Why not cut the expenses now so you can claim all of the $5 synergy value? Anyway that is my take on the events surrounding GSTX's manuevering. Valuation Guy / Obewon

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