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To: CO who wrote (2758)	2/5/1998 4:24:00 PM
From: Andrew H	Respond to of 27968

>>Andrew, I think the company would be more inclined to use warrants in the first place. Warrants would not effect the eps calculation. << Cheryl, have you ever heard of loans being made to a BB company strictly on warrants? I agree the company would be more inclined, but if I were the banker, I would certainly not be so inclined. Would you if it were your money? >>IF they did use restricted shares, they would not be free trading shares and would not be added to the float. The stock price would not be effected nearly as much. The company would then have a year to use the money to acquire and add additional value to the company and then buy back the shares. The end result could be VERY positive.<< I am skeptical that the added shares would not affect the stock price. True the float would not be affected, but the eps calculation would be and that is the basis of the stock price. Hoping for the stock price to rise in order to buy back the shares at their original price is HIGHLY speculative at best. >>There are other factors that drive the price of a stock beside just the eps calculation. The law of supply and demand is a very stong force that drives the price of a stock. << Yes, agreed, there are other factors. But outstanding shares is one of the forces that drives supply and demand, even when the float is limited. I would agree that if there are audited financials showing .11 eps, there could be a bump in demand. If shareholders are aware there could be 40MM more shares hitting the market in a year, that will affect demand. Thus, I do not believe high demand to be sustainable given the prospects of future dilution. Now, if the company can show how these new acquisitions will add substantially to the bottom line, that will be a different story. Personally, if I were Ira, I would not have mentioned the 12MM figure until necessary since it was bound to lead to speculation about near term dilution.