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Gold/Mining/Energy : Harken Energy Corporation (HEC) -- Ignore unavailable to you. Want to Upgrade?

To: Ed Ajootian who wrote (3584)	10/6/1998 12:44:00 AM
From: Razorbak	Read Replies (1) \| Respond to of 5504

Authorized Shares <<How would the number of authorized shares be relevant to the valuation?>> With convertible debentures outstanding, often the authorized share limit becomes a significant barrier, at least temporarily, to further equity dilution. If there are 133 million shares outstanding, and only 140 million shares authorized, then further equity dilution will be minimal until the board of directors votes to increase the authorized share limit (a vote which often requires shareholder approval). If there are 133 million shares outstanding, and 500 million shares authorized, then the artificial backstop is far down the road and won't provide much protection against extreme equity dilution. I often run valuation calculations at the authorized share limit to determine my potential downside exposure in a pessimistic case scenario. (Notice I did not say "worst" case scenario. Sometimes, the authorized share limit is hit, and the board subsequently approves an increase in the limit. That is truly a worst case scenario.) Razor