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


To: H James Morris who wrote (4972)6/3/1998 7:53:00 PM
From: Candle stick  Read Replies (2) | Respond to of 164684
 
A great post from AOL about the junk bonds...............

Subject: Re: Bond Stuff
Date: Wed, Jun 3, 1998 18:13 EDT
From: BMYNARD
Message-id: <1998060322131500.SAA20904@ladder01.news.aol.com>

Hi, I have not read the prospectus of the Amazon bond issue but I think there is a considerable amount of misunderstanding of the nature of the bond issue.
1) Non sec registered bonds can be sold in the US , to Qualified Investment Buyers (QIB's).These are essentially institutions.
2) The nature of the call feature as described in 2003 is penal not beneficial. Assuming that is the only call feature it is unlikely to be exercised. Let me explain by example. Amazon issue zero coupon ie discounted bonds at 10% for 10 years. Assume the similar maturity US Government bond yields 5%. That means Amazon is borrowing at 500 bp more than the US govt , that is the so called spread or risk premium. If in 2003 Amazon wishes to call the bond
and assuming rates not change they will have to bid the yield on the then five year US govt plus 50 bp whichn would be 5.50% . As bond price movement is inverse to yield that is a repurchase price of above 100% ( think about that , good for bond investors not the issuer). For Amazon to do this they would most likely have to have a credit rating of AA or better to achieve lower refinancing . Even Intel is not AA ( I think) , the statistical chance of
a Caa going to a AA rating in five years is extremely small.

Therefore the likelihood of the call being exercised unless yields rise substantially is very small. ie US Treasury prices and call price falling.

In fact I would suggest this is a very expensive debt offering for Amazon , not in terms of the loan it replaces but in the nature of interest compounding that zero bonds exhibit. Frankly it would scare me that they are borrowing at 500 bp over US treasuries in a form reserved for companies that are lacking cash flow ,to pay for future losses !. This is all very reminicent of the late 80's and the similar Payment In Kind bonds issued that led to a
lot of bankruptcies as the economy soured and debts built up to unsustainable levels. Dont be fooled by any comments about not having to worry about the debt build up as it is a zero etc . This is a potential time bomb. Amazon would much rather pay regular coupons if they could afford it. Consider the following.

1) Equity ranks below debt , if company gets in trouble equity is wiped out first . With few tangible assets Amazon equity is particularily vulnurable to this.
2) If you borrowed $250 million today and had to pay back $500 million in 10 years you had better use that money wisely as a rating of Caa implies future borrowing will be hard to come by, especially as you have no assets to offer as collateral. In fact you are in a race to earn more than 10% per year on that money to be able to pay it off. This is especially true in a low inflationary environment. This borrowing assumes a sigificant improvement of
the balance sheet over the next few years.

To sum up , if there are other terms to the bond issue that I am unaware of that may negate some of my points. However, I think the borrowing is a sign of weakness not strength, after 15 years in the bond market alarm bells are ringing all around me.

Regards
Brian Mynard




To: H James Morris who wrote (4972)6/3/1998 8:06:00 PM
From: Candle stick  Read Replies (1) | Respond to of 164684
 
5 million shares of AMZN were just registered for sale with the SEC...... edgar-online.com

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1998.

REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

AMAZON.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7375 91-1646860
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION CLASSIFICATION CODE NUMBER) NUMBER)
OR ORGANIZATION)

1516 SECOND AVENUE
SEATTLE, WASHINGTON 98101
(206) 622-2335
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

JEFFREY P. BEZOS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMAZON.COM, INC.
1516 SECOND AVENUE
SEATTLE, WASHINGTON 98101
(206) 622-2335
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------

COPIES OF ALL COMMUNICATIONS SHOULD BE SENT TO:
L. MICHELLE WILSON
PERKINS COIE LLP
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
(206) 583-8888

Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number or the earlier effective
registration statement for the same offering. [ ] _______________

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________

CALCULATION OF REGISTRATION FEE

======================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(1) OFFERING PRICE(2) REGISTRATION FEE
----------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value
per share..................... 5,000,000 shares $41.7813 $208,906,500 $61,628
======================================================================================================================

(1) Registration fee enclosed herewith. Estimated solely for purposes of
calculating the registration fee under Rule 457(c) based on the average of
the high ($43.6875) and low ($39.8750) prices (after adjusting for the
registrant's 2-for-1 stock split payable June 1, 1998) for such shares on
the Nasdaq National Market on May 27, 1998.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.

PROSPECTUS (SUBJECT TO COMPLETION)

ISSUED JUNE 3, 1998

5,000,000 SHARES

AMAZON.COM, INC.
COMMON STOCK
PAR VALUE $0.01

------------------------

Amazon.com, Inc., a Delaware corporation (the "Company"), has registered
5,000,000 shares of its Common Stock, $0.01 par value per share (the "Common
Stock"), which may from time to time be offered by this Prospectus principally
in connection with the acquisition, directly or indirectly, of entities. Such
shares may be issued in exchange for the shares of capital stock (by merger or
otherwise), partnership interests or other assets representing an interest,
direct or indirect, in other companies or other entities, or in exchange for
assets used in or related to the business of such entities. In general, the
terms of such acquisitions will be determined by direct negotiations between
representatives of the Company and the owners of the businesses or properties to
be acquired or, in the case of entities that are more widely held, through
exchange offers to stockholders or documents soliciting the approval of
statutory mergers, consolidations or sales of assets. Underwriting discounts or
commissions will generally not be paid by the Company. Under some circumstances,
however, the Company may issue shares of Common Stock covered by this Prospectus
to pay brokers' commissions incurred in connection with acquisitions.

The Company has filed a Registration Statement on Form S-4 (including all
amendments thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission (the "SEC") covering up to 5,000,000 shares of the Common Stock
offered hereby. This Prospectus does not cover any resale of Common Stock, and
no person is authorized to make use of this Prospectus in connection with any
such resale or distribution.

The Common Stock is quoted on the Nasdaq National Market under the symbol
"AMZN." See "Risk Factors" and "Description of Capital Stock of the Company."

------------------------

AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.