Smart Alecky. Amazon.com closed at a low of around 4 bucks a stub this year. In a spectacular miscalculation, Amazon offered more than $2B in covertible bonds at the height of the stock bubble in 1999. Rather than taking advantage of their frothy stock price to raise capital, AMZN took on a mountain of debt with the expectation that the convertible bonds would quickly hit a strike price of ~$80, convert to stock, and further dilute the outstanding pool of common shares. Instead, AMZN shares fell like a rock as the tech bubble collapsed, and the company’s survival is imperiled as this debt comes due.
May 9, 2002