Due Diligence - How to Investigate a Stock Message Board

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Strategies & Market Trends : Due Diligence - How to Investigate a Stock

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To: Mary Baker who wrote (238)	4/25/1999 3:13:00 AM
From: EL KABONG!!!	Read Replies (1) of 752

Mary, I took a real quick gander over at RRRR. Here's the results of a 15 minute look. Take it for what it's worth... If you bought in at $5 a share, you have a little over a three-bagger right now. I don't know who said it first but "I've never met anyone who lost money taking a profit". Convertible Debentures: I looked very quickly at this. They appear to me to be of the floorless variety, or what some call a death spiral. Debentures are not a good sign. They go hand-in-hand with companies that are in deep financial doo-doo. Sometimes the holder of the debentures will short against the restricted holdings, the resultant dilution making the short a self-fulfilling prophecy. The fact that the "debt" is used to make an acquisition is even more alarming (to me as an investor). And usually the debentures are written in such a way that the debenture holder has a position in the liquidation queue that puts them ahead of common shareholders should financial disaster occur. "Strike one!" yelled the umpire. A "Letter of Intent" is just that: intentions, not commitments. Generally speaking, some terms will be spelled out in the LOI. Again generally speaking, the people issuing the LOI have likely left themselves with many back doors out of any agreements should future circumstances favor their non-participation. As far as the terms not being disclosed, it's not all that unusual. And taken as a solitary factor it's not a primary worry, but should be of concern to investors looking at the total risk picture. "Ball one." said the umpire. NASDAQ listing requirements are relatively straightforward. Either RRRR does or does not have the necessary assets to maintain their listing. At first blush, it would appear to me as though the concerns may be valid here. "Steeeerike two!" bawled the umpire. The auditors' report is the information that would tip the scale for me. Auditors do not use the phrase "These factors raise substantial doubt about its ability to continue as a going concern." lightly. In fact, this particular phrase is usually remarkably prescient. "Strike three!!!" cried the umpire. Mighty Casey has struck out... KJC

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