Kit, I haven't read the Amazon red herring as I am not in the stock, so I don't know all the details. But here is the way I see it. Internut cos. issue small %ages of their total stock when they first go public. That is to increase price by restricting supply. Then, once they have the fish biting at the hook, the insiders sell more of their own shares. I am not sure how much of the new issue is treasury stock and how much is insider shares, but the idea is to hit the suckers while they are still paying up.
For this 1/2 billion shares, they are going to receive a huge amount of cash, giving them a real book value on the total co., though still next to nothing on a per share basis. Since the currently issued shares have a portion of the huge loss Amazon is running and new shares represent real money, it could even be argued that it is currently anti-dilutive. In other words, each share gets less of the loss. However, that is silly thinking, as most of the suckers buying the stock expect them to earn a profit some day and if they do, these extra shares will definitely dilute the per share eps. I don't think a profit is a real threat right now, but some shareholders do.
Who buys this stuff? The bankers are on the line telling the herd that they can buy the world's best stock below the market and for zero commission (they usually don't mention the banking fees, which dwarf any possible commission charge <g>). They will be oversubscribed, guaranteed.
I have seen similar plays by ponzi stocks in the past, but never of this magnitude.
MB |
