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

To: Anaxagoras who wrote (2002)	11/13/1998 3:47:00 PM
From: Q.	Read Replies (1) \| Respond to of 2506

re. VTCH, I looked at the 10k 10Q and DEF14a. What a bizarre history of financing the corporation. The 20% interest-rate loans from the boss really got my attention. Those are paid off now, but replaced by other really weird stuff. Keeping this co. funded is a real mickey-mouse operation. re. the cash burn and inventory growth, which some here have discussed, this doesn't really bother me. It looks like it isattributable to sales growth. Generally there's nothing wrong with that. The healthiest co. in the world will burn cash if it grows fast enough. This is not to say that I like their business model, though. Aside from the risk related to Brazil's economy, I see several things I don't like: For one, the way that they have 3 mos. of inventory in parts on hand in Brazil or in transit. That is really just way too much for a manufacturer of PC's. Not exactly Dell. When business slows, they will be stuck with 6 or 12 mos. of inventory that gets obsolete fast. Plus lots of debt to service isn't good for when things go wrong. They have a highly-leveraged capital structure and very high interest expenses. Fine for rapid growth, disastrous for reversal of that growth. Agreed, Anaxagoras, that the 80% ownership by officers is not a good thing for squeeze risk. I also don't like to see 1 M shares short out of a small float of 3 M. I enjoy sleeping at night too much to deal with that.