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Technology Stocks : Hummingbird Comm. (HUMC) -- Ignore unavailable to you. Want to Upgrade?

To: Martin Goldenberg who wrote (1464)	4/7/1998 2:01:00 PM
From: litc	Read Replies (1) \| Respond to of 2018

The question about their acquisition method was my question. Now, I understand why the stock has done so poorly after the announcement. If any of you have looked at any empirical studies, you would know why. Generally, firms that have the cash, but choose to use equity for the sake of using "pooling" generate negative abnormal returns. The reason: Firms feel that they don't want to take on the goodwill from a cash purchase, which would dilute earnings from future amortization. And they use "pooling" to minimize the dilution effects. Sounds good? Wrong. Firms generally overpay in acquisitions just to use "pooling". Also, there is the signalling effect. Finally, the market is smart, and it won't be fooled by some accounting adjustments. Bottom Line: I am not too happy with their explanation. If they had said, "Oh, our partner at Andyne wanted our stock so badly that they want nothing but stock to participate in future growth.", then I would feel a bit better.