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Technology Stocks : CDRD (CD Radio)
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To: Chang-Shing Perng who wrote (137)6/18/1997 11:00:00 PM
From: david smith   of 904
 
Dear Chang:

I have seen several messages from you regarding the recent announcement from cdrd that they have authorization from their board to issue and sell 150 million new shares of common and 40 million new shares of preferred. You have taken this information and suggested that if all that is issued at todays price the company would be worth some incredible sum, or if it sold at a lower price the stock will be diluted.
Your argument is likely misinformed and could lead you to some bad investment decisions. The reality is that it is a common practice for companies to gain authorization from their boards to issue shares in great excess of the number they will need for an immediated purpose. CDRD will need to raise capital to pay for its expansion and it should use the appropriate number of shares, issued at the best possible price and on intelligent terms, to raise that capital. That is exactly the same as practically every other listed company would do. When you argue that this company is going to act imprudently because they had their board authorize a lot of new shares, you not making a reasonable argument.
Don't take my word for this. Ask any financial analyst or investment advisor whether or not most companies do the same thing all the time. It is not unlike getting a line of credit from the bank. Always get approval for as much as possible even if you aren't going to use it.
Good luck and tell us what you find out on this point.
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