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

To: Deepak who wrote (3388)	4/24/1998 10:44:00 PM
From: Tom D	Read Replies (1) \| Respond to of 164684

Deepak, I wish I'd written that. Thanks for the excellent post. Next week is going to be wild. AMZN is hard to beat for its stocks entertainment value. Tom D

To: Deepak who wrote (3388)	4/24/1998 10:50:00 PM
From: Gary Korn	Respond to of 164684

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. Deepak, The new $275MM note may signal just the opposite: Interest payments on the new $275MM note do not begin until 5 years from now, in the year 2003. Arguably, AMZN does not expect to have positive free cash flow (i.e., be profitable) until 2003. I cannot tell from this new debt that AMZN expects to have any profits before then. In fact, the new $275MM note replaces an existing $75MM note which (unlike the new note) DOES require regular interest payments and which must be retired in 32 months from now. That may have the best AMZN could swing back in November/December, before the current internet mania. Perhaps AMZN secured the new $275MM note (discounted perhaps) because it expected no profits during the next 32 months and further because AMZN knew that it could not pay the $75MM note back in full within that timeframe. That would be a negative spin on the new financing. Gary Korn

To: Deepak who wrote (3388)	4/24/1998 10:53:00 PM
From: igor	Read Replies (1) \| Respond to of 164684

I don't think your analysis is correct. A company which issues a discounted note where interest payments don't start for five years is telling the market it hasn't sufficient cash flow to pay interest. igor

To: Deepak who wrote (3388)	4/25/1998 2:38:00 PM
From: Mark Fleming	Read Replies (1) \| Respond to of 164684

That's nonsense. Yes, companies with cash are attractive buyouts, but not companies that traded cash for debt. Do you know the Balance sheet forumla: Equity = Assets - Liabilities. >>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.

To: Deepak who wrote (3388)	4/26/1998 4:34:00 PM
From: Don Westermeyer	Read Replies (1) \| Respond to of 164684

Deepak, - 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. Yes the stock will continue to attract dreamers. Only when the float increases to 15 million shares or so will the stock trade more in line with fundamentals. - 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. More likely they expect big losses and some further expansion. - 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). I don't think AMZN is financially strong enough to be on an acquisition binge, unless it is something very small. They probably need financing for distribution centers or something. - 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. No way! Who would make that kind of foolish investment? AMZN doesn't need a poison pill in any case. One, too much of the stock is held by insiders and two, there isn't enough equity in the company to 'destroy'.