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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Gary Korn who wrote (3378)	4/24/1998 8:35:00 PM
From: Tom D	Read Replies (1) \| Respond to of 164684

<<<sounds to me like a deal is in the works. A big deal.>>> Could you please explain why borrowing a bunch of money and issuing millions of shares (when you've already got enough to do a 3-for-1 split without issuing additional shares) makes you suspect a deal? Like maybe suggest a hypothetical scenario for me in which you explain how these actions are necessary for the completion of a deal? Thanks, Tom D

To: Gary Korn who wrote (3378)	4/24/1998 9:49:00 PM
From: Deepak	Read Replies (5) \| Respond to of 164684

The issuing of new debt is an interesting news indeed. Clearly, AMZN does not need new cash for operations since they already have enough cash to stay in business for many quarters (as per their burn rate). - The advantage of issuing debt is that the stock price will not be negatively affected as it would be if new equity was issued (due to dilution). Actually, the stock price should react positively to this news because it reduces the likelihood that more equity will be issued. - A company that issues debt is also signalling to the market that it expects to have positive free cash flow (ie. be profitable) because the interest payments have to be paid on a regular basis. A company which expects to have losses for some time to come NEVER issues debt. - I personally think some kind of deal is in the works. If AMZN is planning on buying someone, they should have used the now common method of taking advantage of using their strong stock price as currency for payment. But since they are instead issuing debt, it suggests that the target company may have baulked at a stock swap arrangement (possibly because AMZN stock is so volatile and the target management was afraid that they will be paid in stock whose value could drop by half anyday). - Another interesting possibility is that AMZN itself is the target of a takeover. If it wanted to avoid such a takeover, it would have issued a lot of new stock (this is how poison pills work). But if its a target and it wants to proceed with the takeover (ie. AMZN wants to sell) AMZN would issue debt. This way the company which buys AMZN is financing the deal to some extent with AMZN's own cash. If this doesn't make sense, just remember that companies with lot of cash are attractive takeover targets. Well, considering all the possibilities it seems to me that this news is an overall positive. Clearly, something is in the works. Time will tell. PS: I am alarmed to see posts by people who have absolutely one track minds (either longs or shorts). Please have open minds and analyze news and information carefully for what its worth. If it supports your previous analysis great, otherwise don't hesitate to change your mind. There is no need to trash someone we disagree with. I hope we all make money. Good luck.