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Gold/Mining/Energy : American Eco (ECGOF, ECX on Toronto exchange)
ECX 1.775-8.0%Dec 9 3:59 PM EST
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To: JimieA who wrote (2709)8/15/1998 2:34:00 PM
From: Skeet Shipman  Read Replies (1) of 2841
 
Jim,
It is extremely time consuming and difficult to reconstruct/reconcile their quarterly reports with their annual reports, making assumptions from limited details on acquisitions. The patterns seem to be there: negative cash flows from operations, transfers of operating expenses to acquisition expenses, Canadian accounting which under estimates number shares outstanding. This is how they were able to show earnings growth on a per share basis, even though they have been paying more than twice their PE for the acquired companies. The scheme works as long as you keep acquiring larger and larger companies (a pyramid). Once you stop acquisitions the deferred expenses, aggressive estimates of revenues, increased operating expenses, and actual outstanding share accounting catch up. If you have not been able to increase actual revenues(cash) inordinately the pyramid collapses. Entering this stage the bond issue is made. Anyone left holding stock, acquired company owners and public, loose.

I hope am wrong, but the stockholders have lost on ever other bond issue. If the company originators end up the bond holders with low stock holdings, it may have been a well orchestrated scam.

Skeet

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