Originally Posted by
homer985
Food for thought... one of the common examples I keep hearing about bad R/S's is Sun Microsystems (JAVA).
What people don't realize is that is a bad example. JAVA is the perfect example of tech company that was overvalued prior to the R/S -- and then took a dive afterwards. JAVA's annual (fiscal) revenue in 2007 was $13.8BB. But they had 3.1BB shares outstanding giving them a Market Cap of $17BB. They did a R/S that brought their outstanding down to under 800MM... today, their Market Cap is about $5.9BB with similiar amounts of annual revenue.
Yep, that is a fraction of what it once was (65% drop) -- but is it because of the R/S, or a combination of the stock being WAY overvalued previously and the effects of a poor economy WITH the R/S? Let me add that HPQ (which did not do a R/S) dropped 40% in the same time frame.
With Sirius, their Market Cap is currently just $1.2BB, with annual revenue of approximately $3BB (about half of JAVA, but a MC that is just 20% the size)... that is hardly overvalued, IMHO. Hell, it's just a stones throw away from the previous bankruptcy price it was just a couple months ago. The fact is, there's not much value in the Market Cap for it to take a nose dive after a R/S.
So anyhow, I reject the JAVA example -- as that was a company that was clearly overvalued at the time, IMHO. Coupled with bad timing to do a R/S and a crumbling economy... that made it all the easier to cut into the overvalue in that stock. With Sirius, there is no "overvalue" to cut, IMHO.
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