Hi Jan; I looked through the company press releases and 8-K
filings, and it smells to me like a Bahamas bank deal. That is,
I suspect that the principal is guaranteed by a floating conversion
to the stock price. I find it very perplexing as to why they would
suppress information about this deal while they were so forth-
coming on the interest rate, etc., of the $75MM deal.
If I were running the ship, I would sell shares of AMZN off shore,
unregistered, where they wouldn't interfere with the small float
in the US. In order to make it palatable, you call it a bond, but
guarantee the principal by conversion to shares. But require
the interest payments in cash. - That way you can book the
thing as debt while it really is an expansion in equity.
The book Blood in the Water, a recent Wall Street
best seller describes this sort of process well, and Bezos
is a derivatives type.
It would be very useful to find out the details of the loan. The
real question is whether the conversion rate is floorless. In
order to guarantee principal return to the bank, the technique
is to make the loan convertible into shares of stock at a rate
equal to recent stock prices in the open market. Therefore,
the bank gets control of a number of shares equal in value
to $275MM, or whatever. Thus the total market cap is
equal to the number of shares outstanding times the price,
plus the loan amount. This means that the number of shares
outstanding has effectively been diluted. With AMZN at
a market cap of $2000MM, the dilution is about 12%. But
if the stock craters, the dilution increases proportionately.
This did in the stocks of such companies as CTYS, and
RACE.
In short, their doing this off-shore doesn't smell good at all.
The stock price should be interesting tomorrow. My guess
is a pretty good up day, maybe even up past $100. assuming
the rest of the market doesn't tank.
-- Carl |
