Why short at 6 3/8? It's not like it has much downside, while
the upside is much much more.
Come again?
From the financial statement;
reporting a 62% reduction in net loss to $2.5 million or ($0.18)
per basic and diluted share compared to $6.5 million or ($0.48) per
share in the year-ago quarter.
OK, lets see how they achieved this;
Three Months Ended
March 31
1998 1997
------ ------
Net revenues $461,753 $4,197,836
Cost of revenues 84,920 2,666,135
hmmm, cost of revenues decreased dramatically because ... they
did not sell too much!
Operating expenses:
Research & product dev. 1,166,216 4,587,780
Sales & marketing 350,945 1,903,345
General & admin. 1,244,318 1,600,934
Lets see, they cut R&D to nearly 1/4th of what it was, Sales &
Marketing to nearly to 1/5th of what it was. Only the General &
administrative expenses stayed about the same. It seems like
the real employees (engineers, sales) got booted while the
management stayed put.
Interest and other, net (156,829) 99,112
And instead of getting interest from their cash balance somewhere,
they are paying interest now. 156K quarterly is 600K annually.
If you assume a 10% loan rate (with their credit rating that
would be a miracle but lets just assume), we are looking at a
$6 mil short term debt. IMHO this is just the tip of the iceberg
they probably got extensions from their creditors.
So that is how they lost less money. They cut down on the research,
they cut down on the sales force, they cut down on the sales and
voila! less losses!
I think this is unbelievable! This was a $1 1/2 stock before
investors (speculators) bid up anything Internet related to
the moon. Actually looking at the financials, they do not even
deserve the $1 1/2.
Am I missing something?
regards,
Gokhan
* I am short SEVL from 8 5/16.
** This is not investment advice. The above is my opinions only.
*** And to answer your original question of Why short at 6 3/8?
It's not like it has much downside, while the upside is much
much more. it has 100% downside potential and that is good
enough for me. |
