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Technology Stocks : Safeguard Scientifics SFE -- Ignore unavailable to you. Want to Upgrade?

To: still learning who wrote (1607)	8/25/1998 5:33:00 PM
From: John Arnopp	Read Replies (1) \| Respond to of 4467

With NAV = $29.54, there is a $2 premium, so the market is being consistent in its valuation of Safeguard. Technically, if that is what you are referring to with "breakout," I have no idea, as I don't claim to be a technician. For me, fundamental analysis is the way to go, but whatever works... I think the market is not placing much of a premium on SFE because the rights have not done very well of late. Referring back to a dividend model for Safeguard, when the rights trade at $5 (shares at $10), 3 offerings a year add about $10 of value to the NAV ($=dividend/r, where r = your required rate of return). If the shares are only going to trade at $5 (or less!) then there is $0 value created for the long-term holder. Even if the short-term SFE holder can get about $2 per right, this is $6/5 shares per year, or $1.20 annual dividend. At a 30% (typical VC investor's required return) discount, you can figure on adding $4 of value to the NAV. But most SFE investors tend to exercise and hold the rights, so when they trade below the exercise price, it tends to be very discouraging. Time will tell. --John