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

To: Jan Crawley who wrote (3455)	4/26/1998 11:18:00 PM
From: Gary Korn	Read Replies (1) \| Respond to of 164684

Interesting post from the Motley Fool. I think Castanza is talking about some of us, but in all honesty I was not short ASND from 80 to 20 (although I wish I had been): Subject: Re: Senior Discount Notes Author: Castanza Date: 4/26/98 6:34:17 PM (ET) By the way, about a dozen guys that were on the ASCEND thread at SI and shorted it from 80 down to 20, have suddenly shown up on the AMZN thread and they are hammering the stock. They know that stocks can and DO fall 75% in a heartbeat, and they are ready to do it again in AMZN...

To: Jan Crawley who wrote (3455)	4/26/1998 11:22:00 PM
From: Gary Korn	Respond to of 164684

Excellent post from the Motley Fool thread: Subject: Re: Senior Discount Notes Author: Early_Retirement Date: 4/26/98 9:58:27 PM (ET) I did some more digging into amazon this weekend in preparation for my put purchase on Monday. This definitely is not a sustainable business model. Everyone should read the following excerpts from the amazon annual report. It states clearly that a likely condition for amazon seeking new dept is if it could not meet its liquidity requirements. If anyne has the terms for their new $275 million loan, please post. EXCERPTS FROM THE MARCH 1998 ANNUAL REPORT: ON FUTURE FINANCING If cash generated from operations is insufficient to satisfy the Company's liquidity requirements, the Company may seek to sell additional equity or debt securities or to obtain a line of credit. The sale of additional equity or convertible debt securities could result in additional dilution to the Company's stockholders. There can be no assurance that financing will be available in amounts or on terms acceptable to the Company, if at all. ON THE DECEMBER 1997'S ($75 MILLION) LOAN The Loan is secured by a first priority lien on substantially all of the Company's assets. The Loan includes covenants restricting certain activities by the Company, including (i) the incurrence of additional indebtedness, (ii) consolidations, mergers and sales of assets and (iii) dividends and distributions to stockholders. In addition, financial covenants require the Company to, among other things, maintain a minimum cash balance, maintain certain levels of earnings or losses before interest, taxes, depreciation and amortization, limit its accounts payable aging and limit its capital and acquisition expenditures. The Loan contains standard events of default, including, among other things, a change in ownership or control. As a result, the Loan may reduce the Company's operational flexibility and may limit its ability to pursue market opportunities. The Company expects to use the proceeds of the Loan to support its strategy of investing heavily in marketing and promotion, product development and technology and operating infrastructure development and may commit to significant fixed expenditures. The Company's ability to generate planned future revenues, and therefore its ability to comply with the Loan covenants, may be affected by events beyond its control. If the Company were unable to satisfy the Loan covenants, the lending institutions would be entitled to exercise their remedies, including the right to declare all principal and interest immediately due and payable. If the Company were unable to make such payment, or were unable to repay the amount owing under the Loan at the end of its term, the lending institutions could foreclose on the Company's assets, substantially all of which are pledged as security for the Loan. ON SUPPLIERS The Company has no long-term contracts or arrangements with any of its vendors that guarantee the availability of merchandise, the continuation of particular payment terms or the extension of credit limits. There can be no assurance that the Company's current vendors will continue to sell merchandise to the Company on current terms or that the Company will be able to establish new or extend current vendor relationships to ensure acquisition of merchandise in a timely and efficient manner and on acceptable commercial terms. If the Company were unable to develop and maintain relationships with vendors that would allow it to obtain sufficient quantities of merchandise on acceptable commercial terms, such inability could have a material adverse effect on the Company's business, prospects, financial condition and results of operations.

To: Jan Crawley who wrote (3455)	4/26/1998 11:34:00 PM
From: Gary Korn	Read Replies (1) \| Respond to of 164684

Jan, The original $75MM note does in fact have a minimum cash balance provision. Perhaps the new obligation was obtained because of a threat that AMZN would be in default of this or other financial covenants: Article 7.14 of the $75MM note states: "7.14(a) Minimum Cash Balance. The Borrower shall maintain at all times a minimum balance of readily available unencumbered cash and Cash Equivalents on deposit or similar accounts at least equal to the Required Cash Balance." (The Required Cash Balance, a defined term, was left blank for reasons of confidentiality.) "7.14(b) EBITDA/Negative EBITDA Covenant. The Borrower's EBITDA, measured at the end of the first fiscal quarter of 1998 for the quarter then ended [THAT IS THIS TUESDAY's RESULTS], at the end of the second fiscal quarter of 1998 for the two consecutive fiscal quarters then ended, at the end of the third fiscal quarter of 1998 for the three consecutive fiscal quarters then ended, and at each quarter end thereafter for the three consecutive quarters then ended shall not be less than the amounts indicated below for the quarter end (and, if expressed as a deficit, the Borrower's EBIDTA loss shall not be greater than the amount indicated below for the relevant period: [the amount is left blank for reasons of confidentiality]. "7.14(c) Maximum Payable Days. as of the end of each fiscal quarter, the product of (i) the quotient of (A) the accounts payable (excluding accounts payable in respect of general administration and marketing to the extent not included in cost of goods sold as reported per GAAP) of the Borrower as of the end of such fiscal quarter divided by (B) the product of (I) the cost of goods sold as reported per GAAP by the Borrower for such fiscal quarter and to be disclosed in financials to be filed with the SEC times (II) 4 times (ii) 365, shall be equal to or less than 100." Gary Korn

To: Jan Crawley who wrote (3455)	4/27/1998 5:10:00 PM
From: J.S.	Read Replies (1) \| Respond to of 164684

Jan, A very good question. Basically at this point we are dealing in potentialities and we have yet to see the debt filing (AMZN did not want to talk about it either). Would you lend AMZN your life's saving? No ..well at what interest rate. At a high enough interest rate, you could take the additional cash over what you could earn on a 30year treasury and buy some put options. Now you reason that if they don't go bankrupt, you get your principal back and if not then you make out on the put. Who will write you this put? If someone is already short, they may want to hedge their bets and write you these puts. If you "pay someone" to write you the puts they are likely to take on a short position to limit their losses (with possibly some calls too). That puts downward pressure on the stock. There is a potential for a huge short position here. With a convertibility option, the lender may not need to buy puts, but we have dilution up the wazoo. Either way you can see that this type of arrangement can't be good for the equity. Rarely does a huge debt float help a stock go up and only when the stock has been so depressed on fears of current account deficit. As I said, we will have to wait for the filing for more details. Take Care, Joe