Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Littlefield Corporation (LTFD) -- Ignore unavailable to you. Want to Upgrade?

To: Musya who wrote (5210)	12/8/1997 12:29:00 PM
From: Jay D.	Read Replies (1) \| Respond to of 10368

I got this off the Yahoo BNGO thread, any comments? Jay Subj: Junk bonds? By: Falstaff5 Date: Dec 6 1997 10:18 A.M PST Reply To: Msg. 14 by billydeal1 It would be one thing if they had indeed issued bonds, because, yes, the interest could then be written off. However, dividends on preferred stock are just that - dividends, and dividends are simply cash payments to the holder of the preferred stock - there is no tax break because it doesn't effect the income statement. The management did this on purpose so that the transaction wouldn't effect the earnings on the income statement, but in reality, it has a worse effect on the company overall. This is because, although the accounting (net income) number looks higher because there are no interest payments (just dividends), the cash flow is worse off because, as mentioned above, there is no tax break for DIVIDEND payments. So the company is cutting off its nose to spite its face when it issues preferred stock instead of bonds, at least in this case. However, the worst part about the whole deal is that the convertible price of the stock was something like $5.50-$7.00, and the stock traded at more than $9 for awhile and more than $8.00 for over a month. That means that the preferred shareholders were able to convert their shares and sell them at a huge profit. This has the same effect on BNGO's financial position as if it had done a secondary public offering and issued the shares at $7.00 when, in fact,the shares were trading in the market at $8-$9. If they had done this instead, people would have cried bloody murder, but the way it was done (sneakily), most people probably didn't even notice. Believe me, it wasn't by accident that the management of BNGO did it this way - they were trying to be as low key as possible about the fact that they were issuing more shares at a bargain price. Even if it wasn't done to be underhanded, it showed incredibly poor judgement on their part. I'm not sure which one is worse. By the way, I am (very recently) a former shareholder of BNGO, that's why I'm taking time to write this. I am NOT shorting the stock. The underlying fundamentals of the bingo industry seem to be great - it's just that I, personally, don't really trust this management team. The price may go up in the future, but I wouldn't bet my money on it - I work too hard to make it in the first place to trust it to these people.