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

To: Tom D who wrote (3439)	4/26/1998 10:02:00 AM
From: Gary Korn	Read Replies (1) \| Respond to of 164684

I just don't understand it, based on the available information. Tom, Me too! And I appreciate your decency in trying to stir up some genuine analysis. FWIW, my first impression when I saw the news was, "hey wow, they are accumulating a bunch of cash for some big move." But I'm pretty sure that my first impression was wrong. Due to the analysis here on SI, I've come to realize that new note clearly is not a cash accumulation move (it essentially generates no extra cash). However, the original $75MM note did preclude some things that the new note may note. The original note prohibited any acquisition or merger by AMZN. (Article 7.3). The original note also prohibited AMZN from acquiring the capital stock of another entity (Article 7.4). The original note further prohibted AMZN from using the proceeds to acquire another entity (Article 7.7). I can't find anything in the original note itself that precludes a secondary offering. However, the Stock Purchase Warrant agreement tied to the note suggests that a secondary offering is permitted. The Warrant agreement, you'll recall, would have generated an extra 750,000 warrants (exercisable by the lender) had AMZN not paid back the note early. Anyway, the warrant agreement says that the number of warrants will be adjusted "if Amazon at any time subdivides (by any stock split, stock divident, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares." So, if AMZN did have the option to recap (but chose not to), perhaps it elected to replace the old note with one with more liberal terms so that -- with the 200MM new shares it seeks -- it can effect some kind of merger or acquisition (something that was prohibited). At the moment, I can't think of another reason for the combination of (1) 200MM new shares and (2) replacement of a good loan with a bad loan. Gary Korn