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Technology Stocks : Source Media SRCM
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To: MW who wrote (2574)6/4/1999 2:12:00 PM
From: Smilodon  Read Replies (1) of 3015
 
I agree with your analysis of the warrant dilution.

I was using 27% as well. In my conversation with the Soundview analyst, he had not thought about the dilution of the warrants. It was not factored into his valuation model.

Given SRCM's stock price, that gives the JV a current implied value of $1.1 Billion. A bit high for a startup in my opinion. Also, TV Guide gets half of this highly valued startup for only $22 million. To me, if you really believe in the JV's potential, why not just buy TV guide? It has less risk and their share of the JV is not as fully valued in their stock price.

And I agree, with your assessment of the 2 key issues.

The only other issue that I see is if the JV succeeds, but it takes longer than expected and consumes more capital. This would further dilute SRCM's ownership, and might cause them to have to liquidate the remaining share to raise cash for debt payments.
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