Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: DavidD who wrote (12513)	11/23/1998 12:56:00 PM
From: Reginald Middleton	Read Replies (1) \| Respond to of 74651

<In other words, if MSFT stock falls below $88 anytime soon, people will start putting those warrants back to MSFT for cash. At $76, the whole liability can be put to MSFT.> And what is the probability of the stock falling to those levels and staying there for any significant amount of time? If the stock fell to the average price, there would be very little putting for the article failed to take into the account the premium paid for the warrants. It must fall below the premium minus the strike price. Even then, MSFT will probably make off like a bandit since they now have a cheap source of stock to fund thier meritorious compensation packages. MSFT stock is currently more valuable than cash.

To: DavidD who wrote (12513)	11/25/1998 7:37:00 AM
From: nihil	Read Replies (1) \| Respond to of 74651

RE: Put warrants The sale of put warrants has been extremely profitable to MSFT ($121 million last year) and a few others who have broad stock option programs. Most of the MSFT warrants expire worthless and even if they were exercised, they would procure cheap shares for employees stock plans. The Times article is incorrect in terming the warrants "off balance sheet" liabilities. The warrants are exercisable for cash or shares (at MSFT's option), so in the event of a stock price collapse, the warrants would be satisfied by the issuance of shares at market price and would have no necessary cash implications at all. I wish I could sell 75 million MSFT puts on my own account, especially if I could deliver shares of MSFT in settlement. From the latest 10Q: "Microsoft repurchases its common stock in the open market to provide shares for issuance to employees under stock option and stock purchase plans. During the first quarter of fiscal 1999, the Company repurchased 5.1 million shares of Microsoft common stock in the open market. In addition, the Company has executed structured repurchases with an independent third party. Under these arrangements, a portion of the purchase price will be paid in the next five or six years and determined based upon the price of Microsoft common stock at that time. The timing and method of payment (net-share or cash) is at the discretion of the Company. The differential between the cash paid and the price of Microsoft common stock on the date of the agreement is reflected in common stock and paid-in capital. There were no structured repurchases during the first quarter of fiscal 1999, and 11.7 million shares were purchased under these arrangements during the first quarter of fiscal 1998. To enhance its stock repurchase program, Microsoft sells put warrants to independent third parties. These put warrants entitle the holders to sell shares of Microsoft common stock to the Company on certain dates at specified prices, and permit a net-share settlement at the Company's option. On September 30, 1998, 75 million warrants were outstanding. The outstanding put warrants expire between March 1999 and September 2001 and have strike prices ranging from $76 to $88 per share."