Profit from WCOM fraud
- Thread starter lojze
- Start date
as a long term trade ?
June 26, 2002
Competitors may benefit from the elimination of WorldComâs capacity mismanagement.
WorldCom, Inc. (NASDAQ: WCOM) (Price: $0.83) disclosed that it had inappropriately understated its operating expenses by $3.8 billion in the last 15 months. This almost eliminates WorldComâs entire reported earnings before interest and taxes (âEBITâ) during the period.
For the subject 15 month period EBIT had been reported as over $4.3 billion. EBIT was reduced to just a mere $0.5 billion. As a result, the expense understatement accounted for practically all of WorldComâs reported EBIT.
Reported EBIT as a percentage of sales was approximately 10%. Restated EBIT as a percentage of sales is approximately 1%. WorldCom can not economically maintain its current services at current prices, even without accounting for capital expenditures and interest costs. WorldComâs capacity can no longer be utilized to inappropriately affect legitimate industry competitors.
We believe AT&T Corp. (NYSE: T) (Price: $9.99) will be among the competitors that will benefit from the elimination of WorldComâs unsustainable pricing pressure. AT&Tâs core telephone business can be created by selling 0.32 shares of Comcast Corporationâs Class A Special Common Stock (NASDAQ:CMCSK) (Price: $24.24) for each AT&T share purchased.
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David Faber reported today that the bonds are selling for .12 on the dollar.
Option 1 if you can short it after it is halted which I would highly doubt is to buy the bonds and short the common as a hedge.
Option 2 would be to by the bonds and sell the calls as a hedge.
Option 3 would be to just buy the bonds and pray.
Option 4 would be to take WCON up on their next offer for a toaster or airline miles if you switch your long distance service.
Option 1 if you can short it after it is halted which I would highly doubt is to buy the bonds and short the common as a hedge.
Option 2 would be to by the bonds and sell the calls as a hedge.
Option 3 would be to just buy the bonds and pray.
Option 4 would be to take WCON up on their next offer for a toaster or airline miles if you switch your long distance service.
Probably MArtha Stewart will profit from it. Now IMCL doesn't look so bad. This is over 100 billion dollar bancruptcy.
So, how many funds and people own WCOM...........almost everyone. Bigger than Enron.
Boy, I love this market....never a dull moment. Keeps my cardiolagist very busy.