I was just sent this from a USWB employee, it makes sense, but I am anxious to hear their earnings report next Tuesday.
From: Carolyn Aver
To: "'Corporate-all@uswebcks.com'" <Corporate-all@uswebcks.com>
Subject: FW: Questions on stock movement
Date: Mon, 12 Apr 1999 13:40:58 -0700
X-Mailer: Internet Mail Service (5.5.2448.0)
Hello All,
A number of people have asked about what might have caused the recent stock movement. While it is impossible to know what all the factors are that influence our stock price at any moment, we do have some information about a number of actions last week.
The main item we know of that contributed to the decline is a recommendation to sell that was issued by a group that is commonly linked with taking "short" positions in stocks and then capitalizing on it by beating the price down. The report basically talked about what we're trying to do, and why they think we won't succeed. If any of you are worried about our success, I encourage you to read Robert Shaw's e-mail from the weekend.
One thing that should not have, and I don't believe did, contribute to the decline is the recent filings of "registration statements" the Company made with the SEC, as many people have hypothesized. We recently filed an update to a number of "registration statements" that we must keep on file with the SEC in connection with our acquisition program. The filing was merely an update to the registration statement that the Company has been using for over a year in connection with acquisitions. The amount of shares registered, approximately 16.7M, is unchanged since the registration statement was filed in December 1997. About 12.4M have already been used for acquisitions completed to date, and are already reflected in our total
shares outstanding number. Apparently, when the stock began to fall last week, people went looking for a reason and saw this filing, and came up with theories about a connection where there isn't one.
Some people have also asked about whether these stock issuances cause
"dilution" to their own stockholdings. Dilution occurs whenever the Company issues more stock (including issuing stock to employees). The effect of dilution is that any earnings of the company will have to be divided among more shares. But so long as the issuance adds to the Company's earnings, there is no economic dilution. These issuances that add to the Company's earnings per share are called "accretive." The Company's acquisition program is obviously aimed at increasing shareholder returns, not decreasing them. Accordingly, we only make acquisitions of very strong businesses that we expect to be "accretive," even in the short term. This is in contrast to many strategic acquisition programs, which often involve deals that are
"dilutive" in the short term but are expected to ultimately be accretive long-term. What all this means is that our acquisition program is designed not to cause economic dilution to existing stockholders.
I hope that helps answer some of your questions.
Regards,
Carolyn
C A R O L Y N V. A V E R
Executive Vice President and Chief Financial Officer
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