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Technology Stocks : BORL: Time to BUY!
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To: Paul Corbett who wrote (7653)11/23/1997 12:01:00 AM
From: Kashish King  Read Replies (2) of 10836
 
...it seems that a company with 40m shares rading at $12 is about equal to a company of 52m shares trading at $10.

Let's assume that $12 was a meaningful valuation of BORL the day prior to the announcement -- that's obviously a matter of interpretation -- and let's assume that BORL is going to print another 12 million shares to purchase VSGN -- that is, they are going to borrow the money directly from the existing shareholders, interest free. All the sudden there are 30% more shares on the market and one should expect, all else being equal, that the price of BORL stock would drop at least 30% to $8.40. Those who considered the $12 value an abberation will be lopping 30% off a lower valuation and that puts BORL back in the mid-singles.

We should expect BORL to be trading in the $7 to $9 range based on simple arithmetic. However, we haven't factored in the loss or gain of the company being acquired and the cost of restructuring. Well, VSGN lost $3,600,000 and that's going to translate into a loss of about .07 per share based on BORL's new share count of 52 million, and we have no guarantee that this quarter VSGN will not lose more than that. In other words, we could be looking at a share price in the $5 to $7 range based on this simple arithmetic. I guess this doesn't look like a very shareholder friendly deal on the face of it. This is ugly.
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