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Biotech / Medical : Zonagen (zona) - good buy? -- Ignore unavailable to you. Want to Upgrade?

To: Cosmo Daisey who wrote (2524)	2/25/1998 2:53:00 PM
From: Diamondcutter	Respond to of 7041

Share repurchases are paid for by cash (obviously). Companies can raise cash for share repurchases or any other investment (like R&D, an acquisition, new plant etc.) through selling stock, debt or internally generated funds. The use of cash should be allocated to what provides the best return on that money. Given that ZONA's operations are a user of cash for some time, there must be adequate reserves left for this if R&D is to continue as anticipated. Generally, boards of directors must OK any significant expenditure of cash and so AUTHORIZE a share repurchase. This means the CEO/CFO can (but not necessarily must) actually purchase shares in the open market. It is true that sometimes there is an authorization out there, but shares are not repurchased possibly because the company wants to be prepared for an undue future price decline or has found better use of that cash. Pessimists will also point out that the authorization can be a ruse, but management's intention should be figured out after the first 10-Q filing. Companies often are secretive on repurchases during a quarter to not alert other buyers as this would drive up the average purchase price. As a rule, shareholders should welcome shares being repurchased as the cost of equity is far better than that of today's cost of debt or meager short-term treasury interest income. Excess cash earning a couple percent pretax in treasuries is far less optimal than reducing shares outstanding. Diamondcutter