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Microcap & Penny Stocks : MegaWorld Inc. (MEGW)
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To: BS Buster who wrote (871)11/15/1998 1:13:00 PM
From: Emec  Read Replies (1) of 1058
 
BS Buster, you raise valid concerns. Why did Charles Mcphail agree to be acquired by MEGW? He had wanted to go public for some time I understand and saw this as an opportunity. It is not unusual to go public through this mechanism. Yes, there are advantages to doing an IPO but the prices is hideously expensive compared to this method. Why MEGW? Believe it or not, McPhail liked MEGW's businesses that are developing-both the internet telephony and the real estate business. Once MEGW moves to Nasdaq in early 1999, and files its 10K, they should be able to attract "real" investors based on their financial performance. MEGW has been a shell but the internet business should begin this quarter and be cash flow positive. This is a very high margin business. Yes, the acquisition was paid for by issuing stock to McPhail. Again, this is not unusual. Fortune 500 companies often acquire companies by issuing stock rather than cash. Look at HBOC. How do you think they got something like 300 million shares outstanding? Issuing shares does not necessarilty result in dilution of earnings. That is why you often see language in a press release to the effect that a acquisition will be accretive to earnings even if stock was used in the acquisition. In other words, if MEGW had 5 million shares outstanding before the acquisition of TBS and will have 10 million after the acquisition, will the total net income be more than double with TBS than without it? If yes, the acquisition was not dilutive. I believe this to be the case. I think everone is just going to have to wait until they can see MEGW's first SEC filing in early 1999. Unless I miss my guess, you will be pleasantly surprised.
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