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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (24160)	5/4/2000 2:02:00 AM
From: saukriver	Read Replies (1) \| Respond to of 54805

MSFT--Put Warrant Obligations But if the information is already in the notes to the financial statements, investors are made aware of the facts and should take it upon themselves to understand the implications. I don't see any decision that would be different for an informed investor being made aware of the facts by way of the notes instead of the columns of numbers First, if there is a rapid drop in the share price, the liability of a company that sold put warrants suddenly increases. That happened, for example, suddenly on April 7. We won't see footnotes that explain that for a while. Mr. Market moves quite a bit faster than Mr. Accountant. The 90s were replete with Barings, hedge funds, LTCB whose fortunes changed suddenly. If MSFT leveraged itself with put warrants, and its share price drops to $45, there will be way more liabilities (potential claims on its pile o' cash). If that gets out, more investors might bail, the share price falls, and there will be still more claims on the pile o' cash. How is this unlike being on margin? Second, MSFT has quite enough people with ego to believe it can beat Mr. Market. Unfortunately, the very brightest have already headed for exits. That leaves a lower brains-to-ego ratio. I would not be terribly surprised to learn that MSFT was heavily leveraged with put warrants. Third, in one post last weekend you pointed to MSFT's $20B pile o' cash as reason it might likely weather the coming legal storm of private litigation. I missed the part where you, a guy who studies financial statements with great care, might have footnoted $20B "(less the $12B--or whatever the number turns out to be--or so that MSFT loses speculating on its own share price in the market)." Like many, even you just pointed to MSFT's $20B pile o' cash without noting the pile o' potential liabilities. saukriver