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

To: Gary Walker who wrote (22042)	10/17/1998 1:43:00 AM
From: MrLuckyman	Read Replies (5) \| Respond to of 164684

*The final word on Amazons cash position and junk bonds* Taken from last quarter's "Management's discussion and analysis of financial condition and results of operations" -------------------------------------------------------------------------------- On May 8, 1998, the Company completed the offering of approximately $326 million gross proceeds of the Senior Discount Notes ("Senior Discount Notes") due May 1, 2008. The Senior Discount Notes were sold at a substantial discount from their principal amount at maturity of $530 million. Prior to November 1, 2003, no cash interest payments are required; instead, interest will accrete during this period to the $530 million aggregate principal amount at maturity. From and after May 1, 2003, the Senior Discount Notes will bear interest at the rate of 10% per annum payable in cash on each May 1 and November 1. --------------------------------------------------------------------------------- Hmmmm… this means that the company issued $530 million in junk bonds (value at maturity) which they don't have to repay until the year 2008. AND, they don't have to start paying interest until the year 2003. Not bad, they have $326 million to play with. BUT, from 2003 onwards, they have to start repaying the interest. How much is the interest? 10% per year!!!!! OR, over $30million a year, payable twice yearly!! That's a whopping $15 million twice a year. Chop THAT off your earnings numbers and it doesn't look good!! So, the company expects that by the year 2003, it will be able to start making in excess of $30 million in profits per year to pay back this junk bond and have some left over for earnings. Okay, let's see what analyst earnings estimates are from now to the year 2003. EPS estimates 1998 -1.71, 1999 -1.72 (First Call estimates). A (1.72) loss next year is equivalent to an $80 MILLION dollar loss. Shave that from the cash. Okay, 2000 estimates are what? Another loss, perhaps not as much, say -.50 to -1.00. That's another $30-50 down the drain. Then 2001, 2002 MIGHT be their golden years- there's actually a chance they'll break even!!! So if this scenario happens (a very optimistic one) they won't be making any profits but they'll be just break even and their cash position will remain the same (anyone with estimates for years 2000-2002 please post). Just when things start looking good in 2002 (at barely positive earnings) WHAM!! 2003 hits them and they have to start repaying $30 MILLION dollars a year for the junk bond. AND, they have to earn over and above this amount because they have to make enough to REPAY THEIR PRINCIPAL of $326 MILLION!!! That means they have to make back the >$70 million in losses they will incur in 1998, $80 million in losses they will incur in 1999, $50 million the year after that!!!! How the hell can they do this???? As I have stated before, this is the biggest stock market scam I have ever seen!!! How can analysts sleep at night with the knowledge that they're hyping this dead dog?!?!?! Shame on them!!! PS-- thank you Jan Crawley for clarifying the difference between true trading volume, as reflected in NYSE or Amex figures vs Nasdaq Market Maker "churn". Nasdaq uses trading volume figures as a selling point to get companies to list with them.