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Microcap & Penny Stocks : Ames Department Stores (AMES)
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To: cmg who wrote (1587)3/15/2000 6:01:00 AM
From: Arthur Tang  Read Replies (1) of 1911
 
In 1999, the company thought they made a steal on Hills department stores. AMES used loan facilities to buy Hills, instead of stock swap and pooling of interest approach. They had to issue stock and bond to cover the loan facilities. They now have some what higher bond interest to pay each year. They need to issue more stock to relieve the interest payments.

That expansion captured the imagination of many institutional investors. After they owned 95%, they are still buying. Salomon, Smith Barney satisfied the market with about 500,000 shares shorted. Then Herzog customers came in and raised the shorts to 3.5 million shares. The institutional buyers severely overbought. Market makers can not move the price higher because the overbought will be worse. So, presently, the more you buy, the lower the price.
Pigs will lose their nest eggs.

When I write $100 here we come, the war cry is for the AMES people to work hard on their company to have higher profits. That prospect will take time too. The inbalance in stock demand has to be worked off slowly. Investors had to lighten their holdings to reach balance, then this stock will behave normally by the estimate of earnings ratio. Unless AMES sell into the demand with new stock, then this problem is not going to be over anytime soon.

Good luck on your investment.
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