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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 239.12+0.4%Jan 16 9:30 AM EST
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To: Glenn D. Rudolph who wrote (35238)1/18/1999 4:52:00 PM
From: KeepItSimple  Read Replies (5) of 164684
 
Never thought of it this way before- but this author thinks that Amazon has NO CHOICE but to get their stock price substantially lower. At its current price there is no chance in hell of a secondary offering, apparently:

The clock is ticking on this POS. I think I'm going to buy a truckload of LEAPs on this thing. There is simply no way they can be in business in 12 months at this stock price. They will be out of cash!!

For this same reason, I don't see any investment bank wanting to get near
Amazon with a 100 foot pole. If they priced a secondary at the current price,
they expose themselves to huge lawsuits when the price drops substantially.
They cannot realistically justify the current market price so they cannot defend
themselves with any sort of hard data to prove that Amazon is really worth $140
a share when they are sued. Since banks are only willing to price shares based
on some value that they feel comfortable that they can defend in a court of law,
no bank will want to touch Amazon.

For example, if Merrill Lynch did a secondary for them, they could only justify a
price of $50/share pre-split or $17 now. Can you imagine what would happen
to your $140 stock if Amazon did a secondary at $17 a share? Your stock
would be worth less than $17 due to the additional dilution. Of course, this won't
happen because Amazon would not allow a bank to price it's secondary shares
well below the current market price. This is why Amazon will have a hard time
putting a secondary offering together. They are stuck between a rock and a hard
place. They would have to sell it themselves over their Web site to their
customers/investors that are foolish enough to buy them.

Without a secondary and with $350 million plus in junk bond debt to service,
Amazon will be out of cash to finance its operations within a year or so. This is
why I believe they will be forced into a position that they will have to declare
bankruptcy.
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