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Technology Stocks : CDRD (CD Radio)
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To: CalculatedRisk who wrote (147)6/20/1997 10:47:00 AM
From: Q.   of 904
 
The investor pack I recd from the co. included two interesting things.

One was a 5 minute video tape promoting the co. and the concept of its product. I've never gotten a videotape as part of an investor pack before -- I'm not sure what to make of this. I did think it was peculiar that the tape stated, as a matter of fact, that the radio receivers would be made by multiple manufacturers. A car radio with a CDRD button was 'demonstrated', but it was left unsaid whether it was just a mockup with a fluorescent blue display that worked (you see the same display in the other materials sent by the co. in the investor pack). They showed the CEO sitting in a music studio (presumably they didn't want to show him sitting in a tiny office with two other people) and some satellites being built by Loral Aerospace (here they were clear that the satellites shown were not CDRD's but merely something similar).

The other interesting thing in the packet was the euphoric report by the Unterberg Harris analyst. He seems to have bought management's story hook line and sinker. While he seemed cognizant of the co.'s challenges in getting financing, his earnings forecasts over upcoming years assumed dilution only in 1997, and none thereafter. I also noticed that he said that he thought that the co. might refinance its present discounted convert deal with something less expensive. I assume that he means that the co. would redeem the converts and get a different deal, perhaps for fewer $$$.

This latter idea is one that as a short I must pay special attention to. I'm rather doubtful about this, as the convert holders would demand a big premium for the redemption and the co. would still have to pay a lot in fees or discount to somebody else instead. Besides, they need the money to pay for the license and a satellite. And they didn't just raise the shares outstanding limit for no reason at all.

I encourage anybody interested in the co. to ask for an investor pack, and specifically request a copy of the analyst reports.
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