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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Harpo who wrote (1974)	11/6/1998 4:02:00 PM
From: Q.	Respond to of 2506

Ben, re. HPRT rebuying its convertibles: I don't know why they are doing it, but I do know that they seem to have too much debt and too much cash for their little business, especially now that they realize sales aren't ever going to take off and they are downsizing. If I were them I wouldn't be happy that I had such a weird balance sheet and I would probably want to do the same thing. As far as the impact on a possible takeover, I don't know, but the $25 M they are setting aside to buy notes will not retire even half of them, so it seems unlikely to me that this will decide whether somebody is willing to take them over. The main thing about a takeover is the question: is anybody willing to pay the enterprise value for what this co. has? The enterprise value (= market cap + LTD - cash) won't be affected by buying back some notes (as this reduces both LTD and cash).