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Technology Stocks : CDRD (CD Radio) -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Vayda who wrote (705)	5/29/1998 1:35:00 PM
From: Candle stick	Read Replies (2) \| Respond to of 904

Below is an excellent well researched and thought provoking post about CDRD from the Yahoo! message boards. take a moment to really read and understand it: "This board is an absolute joke. I came here for the first time today to get some deeper information on the stock and all I see are useless posts either cheering the stock on higher or begging it to go down. No one on this board is a money manager or the owner of a money management business or anything else like that because none of you think or act like one. So let's cut to the chase: CDRD has a market cap of $576 million with 16 million shares outstanding @ $36. They have another $150 million at least in preferred stock and long term debt. They anticipate (if you read the 10Q) that they need to raise another $221 million by the end of 1999 to finance the satellite launches, start up, etc. So, at that point they will have an enterprise value of roughly $950 million (with no cash left), and still will not have commenced operations. Let's say they get a penetration rate after the first 3 years of 2 million subscribers (about what Direct TV was oable to obtain, so this is a rosy projection); at $10 per month plus some advertising and whatever other revenues they think they can derive, they might have $260 million in revenue in the year 2002. At this point they will still not be profitable - that I can assure you - but they will be EBITDA positive with margins likely in the 30% range. So, they may be doing roughly 75 million in EBITDA, best case, in 2002. If you put a resonable multiple on that, say 15x (which is an extremely high growth EBITDA multiple), you get an enterprise value at the end of 2002 of 15 x $75MM = $1.125 billion. However, at that point the company will have certainly raised more debt or done a secondary offering of stock (which they must be pondering after the stock run-up) and will have not only the $150MM of current debt/preferred and the $221 million of anticipated financing needs through 1999, but also must fund the operating losses through 2002 to the tune of at least another $100 million. So rounding off, they will have financing, other than equity of roughly $500 million that you must subtract from the enterprise value. Therefore, at the end of 2002, the equity of the company may be worth something like $1.125 billion minus $500 million which gives you a $625 million value 5 years from today. To compare to today's price, you must discount this EXTREMELY RISKY venture back at some reasonable rate (an investment banker would probably use 25%) to arrive at the market value of the equity in today's world. $625 million discounted back 4 1/2 years (from the end of 2002 to May 1998) gives you an equity value of $227 million. With today's share count of 16 million, the stock is BEST CASE valued at $14.18 per share; worst case, this thing goes bankrupt. Now, I ask you, when momentum investors are buying without doing the math, and short sellers are selling after doing extensive math and research, is it any surprise the the short interest is rising and the momentum investor is forcing their hands in the SHORT TERM? But guess who wins in the long term? People who know the true value of a security. In this case true value (given all potential outcomes) is more likely in the $8 to $10 range. So, until you do real research and real calculations quit the cheerleading and the mindless drivel, because none of you know what the hell you are talking about. Please somebody respond with a rational response refuting the value of this stock. BTW, I had never heard of this stock until Tuesday of this week, and have never bought it or sold it short, but I am in the process of trying to borrow the stock to short it (for those of you who don't know, a thinly floated issue like this is often difficult to short; this is known as a short squeeze as people who have loaned the security call in the loan and the shorts are forced to cover despite wanting to remain short). Best of luck to everyone. BG3535