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Technology Stocks : ESVS vs DCLK
ZULU 0.0001000-50.0%Mar 7 3:00 PM EST
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To: BlackStar who wrote (387)3/3/1998 3:12:00 PM
From: slipnsip  Read Replies (2) of 717
 
Most of the time companies have as an ultimate goal to make money. Thus the owners split the profit. If you own 100% of the company, then you are entitled to 100% of the profit. If you sell 50% to others via offering stock, you get cash to build the business (increase the profits). Or maybe you just want to get out of the business, or possibly diversify your own personal holdings. Many reasons for issuing and selling stock. This is a situation where you are hoping to help finance the company by buying their stock in anticipation of positive substantial earnings some point down the road. Expecting that the money the company gets by issuing shares will be plowed back into future growth or continuing operations. Thus enter into all the normal stock valuations i.e Earnings per share(hopefully positive) and then you can do Price/earnings per share calculations to tell exactly how much you are paying for the past and hopefully future earnings.

Now here is where management is important.. Who is running the ship?? What are they planning to do with the cash??? Are they putting it to work back into the company??? Is management credible. With no numbers or no reporting, we have no way of knowing what they are doing with the funds. When Doubleclick went public, they had to disclose all of these things to the potential investors through an offering circular or "Red Herring". Thus people can be comfortable knowing what they are investing in. In this case, unfortunatly investors are blindly putting up their hard earned cash based upon the expectations that this is going to be a highly profitable business and that management is going to do the right thing. Even if management is credible there is substantial risk that the business plan will fail and you will lose money. If management is not credible, then you are almost guarenteed to be left holding the bag, thus watching the company fail and losing your money.
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