TSIS: WHAT IS GOING ON? Message Board

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Microcap & Penny Stocks : TSIS: WHAT IS GOING ON?

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To: Loren S. who wrote (2970)	7/3/1998 7:58:00 AM
From: jmt	Read Replies (1) of 6931

>>>>I would be very disappointed in the Camerons if so. I know they are trying to keep the company out of debt, but by further dilluting shares, they would be destroying our shareholder value.<<<< This is not necessarily true. There has been much debate in the financial community concerning whether debt or equity better enhances shareholder value. Companies highly leveraged with debt are unatractive to investors for the obvious reasons. The place where debt actually adds value is interest expense is tax deductable, lowering the bill to uncle sam. Earning are lower with debt because of interest expense. But there are more shares with equity financing. In the end the only difference in the earnings per share is the tax benefit, which is offset by the leverage impact on the stock price. Principle payments must be made, taking cash away from operations. With equity the company can hold off on dividends until they can afford it, better financing growth. So to say new stock issues are dillutive is only true if they are offering the shares out the back door at a large discount to market price. jmt

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