Financial Shenanigans: Stocks Looking for a Fall Message Board

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Microcap & Penny Stocks : Financial Shenanigans: Stocks Looking for a Fall

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To: HeyRainier who wrote (9)	5/11/1998 10:21:00 PM
From: Roger A. Babb	Read Replies (1) of 108

Rainier, I will offer up one for you. Nothing illegal here, but reality is very different from the picture being painted by the financials. The stock in question is CTXS, an institutional favorite. Here are my points on this one: (I am short) 1. CTXS sold rights for its Winframe technology to MSFT last Spring. At the moment CTXS can still sell Winframe and it counts for most of the revenues. But as soon as MSFT releases its Terminal Server add-on to NT4 sometime very soon (now in beta), Winframe will be no more. CTXS received $75 million plus up to $100 million in royalties from MSFT. CTXS chose to recognize the $75 million over several quarters. A. They now claim to have $200 million cash plus an earnings stream which includes the quarterly recognition of the $75 million. This is double counting the same money. B. The PE is computed on the sum of Winframe earnings (soon to end) plus the MSFT amortization which is a one time event with limited life. You should not give a high PE for short lived earnings. 2. The EPS is computed on 44 million shares. But the full 60 million shares authorized have already been obligated for management options and the authorized shares have been increased to 150 million shares to allow for yet more options. 3. The management options work like a floorless convertible. They start out at 85% of market price at time of issue but get repriced down anytime the stock price takes a big dip so that basically they are 85% of the lowest price at any time during the life of the option. (Where can I buy some of these?) Thus management actually has monetary incentive to dip the stock price once every couple of years.

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