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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: Zeev Hed who wrote (19924)6/1/2000 5:32:00 PM
From: MGV  Read Replies (2) of 27311
 
Two comments - first, read what I wrote yesterday on this point Message 13806418 - in summary, because it has negative operating cash flow, it is dependent on external financing in the capital markets. The cost of capital is rising in the current rate environment. There is no "probably" about it. Your focus on interest rates per se is too narrow. It is the cost of capital that is relevant and it is going up. For companies that are both operating cash flow negative AND purporting to be gearing up for production, capital is an exceedingly scarce resource. VLNC needs it (if it is going to produce) and their cost of business is going to have to go up significantly to get it. As a corollary, its upside is less at the margin. (i.e. than whatever it was before)

Second, VLNC fell disproportionately farther than the market. I think it is significant that VLNC, after falling so far, has not participated at all in the 20% Nasdaq rally. It not only has not participated, it has fallen farther. This when we are now 2/3 finished with a quarter in which some here would have you believe VLNC is producing at an unprecedented run rate.

As for your purchase based on compelling risk v. reward in your opinion, I say there are many others that have and continue to be much more compelling from last Wednesday.
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