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

To: Mark Myword who wrote (3425)	4/25/1998 11:10:00 PM
From: J.S.	Read Replies (2) \| Respond to of 164684

William, Welcome to SI! This is my first post on this board, but I have spent the better part of an evening going through the posts here. It appears things are getting interesting with AMZN. I like your comment about this loan being like a giant put option. The lender can eliminate most of the risk then by buying put options on AMZN and may potentially make out on both transactions. Because of position limits on the options exchanges, private arrangement with a big Wall Street firm would have to be arranged. The "discount" could be used to fund these puts. That being said, I still suspect that there is an equity conversion option or some attached warrants to these notes. The balance sheet of this company is extremely ugly given the pervasive and ongoing losses. Your 11.5% estimate is extremely generous especially given the deferred interest payments. I think a lender in today's market expects a conversion option at a percentage below the market price. Additionally, as has been pointed out, this deal will not help the bottom line on the balance sheet. Yes they can capitalize part of the costs and amortize as you suggested, but some hit will still be taken short term. That along with losses from operation will require some debt to equity conversion. I suspect that they were already dangerously close to breaking covenant with the previous $75Million loan which perhaps helped precipitate this deal. Amazon.com management realizes the need to diversify and I am sure is looking to use its high flying stock price (for now anyway) as currency for acquisitions. The money raised by this offering is also an important component for this purpose. They may not have a definite target yet, but are just putting themselves in a ready position. I think we may have to wait for two more quarterly reports to see the impact of this deal on the financial statements since the 8-K (or equivalent) has yet to appear on Edgar (just checked freeedgar.com ). The fact that the news came out on a Friday well after the market close, with so few details indicates that this is not exactly a feather in management's cap. I will be looking forward to more details in the days to come. Take Care, Joe P.S. I agree with you about the S. Harman article. The "user experience" lines smack of desperation. Ford has nicer shades of Blue than Chrysler.