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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (9898)	3/26/1999 10:24:00 PM
From: I. N. Vester	Read Replies (3) \| Respond to of 27311

Zeev, there is a serious problem with the whole calculation, in that VLNC is highly punished for spending $145M with no earnings to show for it. That outweighs everything else, and will continue to do so until they erase the deficit of retained earnings (loss). IMO, this makes the whole A-Z exercise meaningless. If anything the total $145 burned shows that these guys are real pro's at raising R&D money, so they should be credited rather than punished. I say that only 1/2 in jest! The other big factor in the A-Z involves the market cap. That is the only positive value and it is large enough to have a very big weight. If you throw out all the negative X values, X4 is very big and indicates strong probability of survival. This makes perfect common sense. The stock price is the only known past, present or future accounting number which indicates probably survival. The market is about the only objective data which is telling us that this company is about to succeed rather than go bankrupt. And it is positive in a big way. The amount of cash they've burned through is either a positive or a negative depending on how you look at it. If you see the glass as 3/4 empty, look at these fools who burned $145M but still have no product! If you see it as 3/4 full, the value of the technology they have developed is worth about $5/share, what they've spent on it (assuming 30M shares). If you assume no PO is imminent, then they should be priced for bankruptcy proceedings. In that case we'd have to figure a liquidation valuation of their I.P. If they can't get it to work well enough to sell it, maybe nothing. If it works, maybe quite a lot (tho maybe not at a liquidation auction). I think you would agree that for any interesting number crunching we'd have to assume they do have a P.O. The big questions are 1) are the PO(s) big enough for them to stop bleeding $$ and 2) if the PO's are big, how much working capital will they need to avoid death by sales. I really don't think that will be a problem because if they build it and sell it money will come. But the point that they may need a whole lot of money just to keep themselves from going bankrupt on inventory before they get paid for it is an important fact of business I have seen no attempted calculations on. How much they spent in the past doesn't seem like useful info regarding their chances for survival. The more important questions are how big do the PO's have to be, and how much working capital will they need to sustain that level of PO. Those seem like more down to earth and interesting numbers to play with, don't they? That where the rubber will meet the road, and tell us whether the current market cap overvalues or undervalues this puppy. BTW it is my understanding that the IDB monies are grants, not loans. But even assuming additional $40M in the till, the A-Z is still overwhelmed by the $145M already spent on R&D. So I doubt you will ever get much value out of A-Z. And it's a bit too deep for most of our fellow threadsters to get into. Far more worthwhile to frame the discussion in more common sense terms, don't you think?