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Technology Stocks : CDRD (CD Radio)

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To: david smith who wrote (135)	6/18/1997 1:36:00 PM
From: Candle stick	of 904

David, I never suggested that this method of raising cash was either illegal or unethical. Its done all the time. But you are misled in several ways. For starters the people who gave CDRD the 135 million dollars did so only because thier capital as well as a hefty return are guaranteed! They will all convert thier preferred shares(at a substantial discount to market prices=thier return for the loan) and dump them on the open market. All 9-10 million shares will be sold before end of November, I am sure, because that is the only way the 'investors' can recoup thier capital+interest. Thats what I have been saying all along. They have nothing to lose and are just 'hit and run' money lenders diguised as 'investors'. Thats what discounted convertible preferreds are all about. It is the original shareholders that will get screwed because the float in this stock will double over the next couple of months and the company will not be any closer to revenues or earnings. They registered 200 million common shares! WHY? Because they plan TO ISSUE them over the next 2 years to raise the 600 million dollars. Probably through more discounted convertible preferred offerings. The buyers of these securities have nothing to lose so long as there is a market in the stock.The incentive is for them to sell in order to realize a quick profit, not to hold. They are in the deal for the guaranteed return and are not stock speculators. No matter what price they sell thier common shares at after conversion, the issue price by the company is discounted according to a formula to insure that the 'investor' gets back his priciple plus interest. The stock ends up severely diluted and the price can only go down. The fact that there are 200 million shares registered tells me that there will be a constant supply of stock available, hence almost no upside. These types of investors are sure to sell into any type of strenth in order to get their amounts done. Your upside is practically nil.I have seen this before and was myself caught long a couple of times in such a situation before I truly understood what was going on. Many stocks like this over time end up on the pink sheets at 5 or 10 cents. I think thats the long term potential for CDRD. Look at AURA(aura systems) and MTCI as 2 examples of companies with great stories, and constant dilution. Then you will understand what I am talking about. MTCI was 2 dollars less than 2 years ago and is now 1 cent! AURA was over 8 dollars late 1995 and is now 1 3/4.......both have steadily eroded straight down with constant dilution, BUT always a great comeback story.....trouble is they never can come back because the float for both is HUGE. AURA has 69 million shares from about 5 million when they first went public and MTCI (which was much higher several years ago) last I checked was around 100 million shares from something around 7-8 million on the public offering. CDRD is right on this track.....by the way, both these companies had revenues and products and even some scattered earnings here and there......CDRD has nothing.

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