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Microcap & Penny Stocks : Dominion Bridge Corp. (DBCO)
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To: clear.thinker who wrote (498)3/6/1998 12:10:00 PM
From: Jay Arkay  Read Replies (1) of 535
 
Thinker, I take your point that these notes would not be of the highest quality, but I think that the effective yield more than fully compensates for that (it would be effectively over 11% per annum for those who buy DBCO shares now at $2, since it will be 7.5% on notes with a face value of $3 per DBCO share). I never implied that the 50% return would be an annual rate of return but rather a total return (beyond the interest payments) for the entire holding period of three years plus the several months needed to get the deal into place. Moreover, you would be compensated for the time value of your money over the holding period by the interest payments. Lastly, I am perplexed by your argument that the gain on the redemption of the shares at $3 would be counted as interest income for tax purposes along with the periodic interest payments, rather than given capital gains treatment. Why is that? And if that were the case, why wouldn't a holder simply sell the notes into the market just prior to redemption in order to have the gain taxed as a capital gain? Overall I still think that this is an attractive proposition (more attractive when I bought recently below $1.50, but still quite attractive), though I do (and did) acknowledge the risks that the deal does not consummate and that Eco could have financial problems over the next 3+ years. Jay
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