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Technology Stocks : Source Media SRCM -- Ignore unavailable to you. Want to Upgrade?

To: Al's Fun who wrote (2341)	4/20/1999 5:26:00 PM
From: Kevin Podsiadlik	Read Replies (2) \| Respond to of 3015

I am not short at the moment (I needed the margin for other purposes (read: DLIA)), but I can tell you that SRCM is about to be a slam-dunk short in the fairly near term. Allow me to explain. I will use small words. One of two things is about to happen. Either SRCM is about to go into a joint venture with TV Guide, or they will fail to do so. I hope you will allow that one of these two will occur. First, let's deal with the simpler, and probably less likely case, that of failure to form the joint venture. In that case SRCM is basically right back in the same sorry state they were in the summer as described in the Forbes article being quoted so widely as of late. No products, no customers, no money, no nuttin', SOL, end of story. Of course, that is such a gloomy scenario, so let's look on the brighter side and see what happens assuming the JV goes through. We'll use the press release Source Media issued on the venture, to avoid any notions of anti-company bias: marketguide2.newsalert.com Now, note the middle sentence of the third paragraph: Source Media will also issue five-year warrants to purchase approximately 14 million shares of Source Media common stock at $14.25 per share, representing approximately 40% of the fully diluted equity. To repeat, 14 million shares will represent about 40% of the equity. Whipping out my handy dandy TI calculator, I find that this means that in total, there will be 14,000,000/40% = 35,000,000 shares of SRCM outstanding. But wait a minute! According to marketguide.com there are only 12,840,000 shares of SRCM outstanding! Dearest me, wherever are those other 22,160,000 shares going to come from? And whatever is going to happen to the balance of supply and demand for SRCM stock when all those shares suddenly show up? I wonder, I wonder, I wonder...