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

To: Glenn D. Rudolph who wrote (3987)	5/5/1998 5:28:00 PM
From: Gary Korn	Respond to of 164684

AMZN is now bigger than BKS and BGP in one department: Debt. AMZN has a loan of $530MM BKS has loans of about $450MM BGP has loans of about $250MM Way to go AMZN! First at last! Gary Korn

To: Glenn D. Rudolph who wrote (3987)	5/5/1998 5:32:00 PM
From: Gary Korn	Read Replies (3) \| Respond to of 164684

Do we need a debt to sales ratio now? For AMZN, given a face amount loan of $530MM against "leading" sales of $400MM, it has a debt to sales ratio of 1.325 to 1! More debt than yearly sales. Amazing. What other new ratios can we come up with??? Gary Korn

To: Glenn D. Rudolph who wrote (3987)	5/5/1998 5:39:00 PM
From: Gary Korn	Read Replies (1) \| Respond to of 164684

The current market cap of AMZN is 2.2B. The lender assumes that AMZN can dilute to pay back the loan. If AMZN diluted 2:1, it would have $1.1B to pay back (reducing its market cap, of course, to $1.1B and its share price to 47ish). I think this is playing both ends of the stick against the middle (is that the phrase)? That is, the lenders know full well that AMZN will have to do a secondary to pay back the debt (or refinance it). I think they assume that AMZN will never pay a dollar of operating income into this debt. The shareholders (current shareholders) like the debt because it avoids dilution for the time being. But it is inevitable dilution down the road. At some point, the piper must be paid. Let me say this another way: The people who took on the debt assume that the market cap. is high enough, and will increase enough, to assure that there will be enough market cap down the road to allow for dilution to pay back the debt. On the other hand, the people who own the stock now -- or are buying now for the first time -- are hoping that the market cap will increase down the road. But the problem is that some portion of the market cap will have to be used down the road -- through dilution -- to pay back the debt. The debtholders and the shareholders are at cross-purposes here. Gary Korn