HOMS, borrowed from another thread, but good article on how they turn in a profit. Tel-Save (TALK) comes to my mind:
Message 15879805
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Like a guest on the Jerry Springer Show, Homestore hasn't been bashful; the company plainly reveals its unregistered shares in public filings, warts and all. But it's taken the unusual result of eliminating these stock-related payments from its pro-forma results. Excluding all the stock deals, it looks like Homestore.com has big profits on little expenses. But by reworking Homestore's accounting to include stock-related costs, Merrill Lynch analyst Henry Blodget finds the company faces another $15.6 million in expenses in the most recent quarter. Adding that in, Homestore's stock trades at 114 times Blodget's 2002 earnings estimates.
Worse, Homestore's "partners" aren't always taking much risk on Homestore shares. America Online, for example, took $20 million and 3.9 million shares of stock to sign a massive marketing deal. But AOL also extracted a guarantee from Homestore that the stock will get to $68.50 by the third, fourth and fifth year of the agreement. If it doesn't, Homestore has agreed to pay AOL the difference. From AOL's perspective, it's a no-lose arrangement; if the stock goes to $100, AOL wins; if the stock goes to $10, AOL still gets a cash or stock payment of $68.50 a share.
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This is exactly what TALK also did.... Talk cut this $19 fixed AOL deal. Same construction.... |
