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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 229.12-0.2%3:59 PM EST
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To: Jan Crawley who wrote (37585)1/29/1999 1:19:00 AM
From: Rob S.  Read Replies (1) of 164684
 
Jan, what do you think about the $1.2 billion debt offering that Amazon has locked up?

On one hand I think it's just incredible that Bezos waas able to secure the $1.2 billion long-term debt at 4.75% interest and while pricing the options for $150+. That puts them in dept similar to the ratios seen by some of the Asian companies before the debt structure collapsed: Amazon has very few real assets outside of the cash they will have amassed and over $1.5 billion in debt. I guess the debt/equity isn't that bad considering most of it isn't spent. Some big money just gave Amazon an amazing vote of confidence - quite a war chest to do battle with.

But, on the other hand, all this masive debt is senior to stockholders equity. If things don't go as well as planned these debts will be paid off before a shareholder sees a single cent. That increases the risk for shareholders at this early stage in the game. Maybe they can use the cash to successfully build the business. It will certainly make their negotiating power much more solid and their flexibility much greater. They can start playing the Amazon of the jungle much more agressively if that makes business sense. At the least it will earn some respect from large suppliers and potential business partners.

Amazon never ceases to amaze.
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