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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (4077)	5/13/1998 11:12:00 PM
From: Ron Bower	Respond to of 78523

Mike, Stock options - you just hit the first thing I look for when researching a stock - hidden dilution. Those stock options, warrants, convertible preferred, etc. may not show up on the balance sheet, but they are 'stockholder liabilities'. Best one I've seen: A weakly profitable company bought out shares of primary stockholders by issuing a note. Reduced dilution by 66%, tripled EPS, greatly lowered PE. Close read found a clause in the note given to stockholders that gave them the right to buy all of the shares back as long as the debt was outstanding. Would take years for the company to pay down the note, If the company was successful, note holders exercised their option. If it failed, they were a creditor getting interest payments and the stockholders would be left with nothing. For what it's worth, Ron