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Technology Stocks : Source Media SRCM
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To: MW who wrote (505)7/21/1998 11:49:00 AM
From: Bobo  Read Replies (2) of 3015
 
Any premium?....

Let's take a look at the case for bulls. And please correct me if you challenge the numbers.

At $25 / share, it would cost an acquiring company $600 mm for SRCM. $300 mm in common stock + $25mm from 1mm options that are outstanding but not included in current share count since they would be dilutive to eps + $175mm from the 7mm shares from outstanding warrants that are not currently included in the share count for the same reason + $100mm in debt.

At $40 / share, it would cost an acquiring company $900 mm for SRCM. $480 mm in common stock + $40mm from 1mm options that are outstanding but not included in current share count since they would be dilutive to eps + $280 mm from the 7mm shares from outstanding warrants that are not currently included in the share count for the same reason + $100mm in debt.

So the question becomes, what do the bulls think an acquirer is really going to pay for patents that are questionably valuable, at best, and worthless at worst. If you're right on the patents being worth $900mm, that is a 50% gain from this point. Based on my discussions with cable execs, this is hard to believe if only for the simple reason that the market really is not asking for the service. Look at the Col Springs and Plano, TX trials -- abandoned. Look at the prospectus for Wink's IPO. The revenue is simply not there. If your wrong, you will lose all your money since this company is bleeding cash. These do not sound like very good odds to me.

Short Again (after thinking thru this logic),
Bobo
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