(LVLT) - Level 3 Communications Message Board

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Technology Stocks : (LVLT) - Level 3 Communications

LVLT 53.63

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Nov 1 5:00 PM EST

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To: Don S.Boller who wrote (143)	3/2/1998 10:52:00 PM
From: Dog	Read Replies (1) of 3873

In Reply to your question as to why the board would split the stock again & so soon? Answer: I had heard that the recommendation to the board in December was to have a 10 to 1 split but that the board wanted to wait till the 1997 financials where done. Then, if things went according to plan, they would have a 2 for 1 split before the IPO. Why would they do this? The theory goes as follows: The Book value per share during 1997 was $10.85 per share after the 5 for 1 split. Earnings for 1997 were anticipated to be $1.15 -- getting a $12.00 per share book value. The disposition of Cal Energy would bring in $4.00 per share gain to get to a book value of $16.00 per share. Then splitting the stock 2 for 1 would give a book value of $8.00. This book value of $8 is the same book value that MFS went public at. I don't think that it is a coincidence. MFS went public at $22 and the rest is pleasant history. The thought is that internet stocks have been going public at much higher multiples. If you compare this to Qwest, they went public at $18 with a book value per share of $.185, a 100 times book value multiple. Qwest has risen to over $70 since November 1997!!! I think they approved the 3 for 1 split to get the book value down to a lower value to support a multiple of book value that would put the price in the normal range of $18- $30 for IPO's. When you review other Internet stocks IPO S-3 filings ( check out the dilution section which is always included) Book value seems to be the dominant factor to consider. Earning are hard to consider as most, including Qwest had operating losses. Heck, some internet stocks are selling for 60 times revenues!!!!! Hope this helps. Time will tell how this all unfolds.

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