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Jawad, in cases of bankruptcy involving a definitive agreement to liquidate
assets and wind down a company such as that contained in the press release
you forwarded, the fair value of the company is strictly book value, or net
asset value. In the case of SMTK, this is the agreed-upon value of the
assets sold ("up to" $192.5 million), plus any other assets (such as cash,
receivables, saleable inventory, etc.) minus any outstanding
liabilities.... and therein lies the problem for common stockholders.
Debtholders have first claim on the company's assets, in order of the class
of debt they hold. Anything left over after all outstanding liabilities
have been satisfied belongs to owners of SMTK's common stock.
Sorry to break this to you, but the situation looks bleak. After all, a
defunct company without assets has absolutely zero chance of any further
capital appreciation beyond that point. The value of the company's common
stock has nowhere to go but down.
Your experience in this stock will be a waste of your money and nerves
unless you take it upon yourself to learn from it, and accept the loss as
something every trader pays during the substantial learning curve which is
prerequisite to attaining professional trader status: TUITION. Some quick
research on the Net about SMTK tells me the following:
- The stock has lost more than 95% of its value since March 1997. Look at a
one-year chart, and one wonders what prompted anyone to take a long position
in a stock like this for more than a few minutes. Penny stocks are penny
stocks for a reason.
- Aside from its chart, the stock had several warning signals leading up to
its being halted. Look at these headlines: "SmarTalk issues final restated
results for 1997 and Q1 and Q2 1998" (11/6/98); "SmarTalk announces
discovery of accounting issues" (1/7/99); "The Pomerantz Firm files class
action against SmarTalk Teleservices Inc. for securities fraud" (1/15/99).
As little as a perception in the market of accounting irregularities - even
if the company vindicates itself publicly - is enough to cause a company's
stock to tank, and to keep its price in the doghouse. (If you want the
perfect example look at REXI.) Then allegations of securities fraud - well,
need this be elaborated upon?
Jawad, I don't know when you took the position, but it sounds as though you
were treating it as a position trade. VERY risky under the circumstances.
Stocks such as this are daytrades at best, but even as daytrades the risk is
huge. To be honest, there is nothing more terrifying to me than the concept
of being in a stock (either long or short) and watching trading be halted.
That is a classic case of utter powerlessness. The capital is tied up
indefinitely and in most cases I have observed, trading is halted when the
stock is in a short-term uptrend (probably engineered by a market maker who
creates momentum by buying, then sells his long positions and sells short to
the unwitting who pick up his shares on the way up) and releases
devastatingly bad news (after which time the market maker covers for a
another substantial gain). This kind of manipulation is a fact of life for
traders.
Also, good money management dictates that you NEVER let a profit turn into a
loss, and make sure to exit losing trades quickly. No guidance, rule, or
magic bullet trading system can save you if you forget this one rule.
I had beginner's luck at the outset too, then a few devastating losses woke
me up to reality. Jawad, the best you can do is lay off the action for a
while, papertrade if you wish, and invest in some literature. Study all
your former trades and write down your mistakes. Just like your school
education, your education as a trader requires considerable investments in
time and money. If you are unwilling to invest the time, the money is not
an investment - it's being flushed down the toilet. The adverse
psychological impact of devastating losses cannot be underestimated - if
substantial losses do not ruin you financially with great speed, several in
a row will obliterate your self-confidence and good judgment and finish you
as a trader anyway.
I hope this helps.
Good luck,
Paul Szilassy
-----Original Message-----
From: jawad <jawad777@xxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Wednesday, January 20, 1999 11:34 AM
Subject: STKS: SMTK + At&T-_HELP Please
>First of all, hi everybody. If you are wondering how i am out of
>school so early, it is because i just took my AP government and AP
>physics tests, so i got out of school early. As some of you may know
>i bought SMTK @ 1 1/4 about 1 week ago. At one point i had made about
>a 150% return, and then the market took it back. It is now down to
>about a 50% return. Now, the trading of that stock has been halted.
>The news report i have are here, please take a look at them. Please
>tell me what they mean. Will i lose all my money or will i make upto
>6.97 per share? I think it is the latter; however, i have heard
>different. I had perviously stated i thought the stock was going up
>to 10; i think i may be pretty close. Unless of course this means i
>will lose all my money. Please give my your opinion about this matter.
>Thanks
>Jawad
>Here is the news.
>01/19 17:05 SmarTalk Signs Definitive Sale
> Agreement with AT&T <T.N><SMTK.O>
>
> SmarTalk Signs Definitive Sale Agreement with AT&T
>
> DUBLIN, Ohio and NEW YORK, Jan. 19 /PRNewswire/ --
>SmarTalk TeleServices, Inc. (Nasdaq: SMTK) announced today that it has
>signed a definitive agreement to sell substantially all of its assets
>to AT&T (NYSE: T)for up to $192.5 million in cash, subject to downward
>adjustment at closing. Separately today, SmarTalk has commenced a
>Chapter 11 reorganization
>case in the United States Bankruptcy Court, District of Delaware.
>
> AT&T said SmarTalk's assets will enable it to expand its prepaid card
>retail distribution capability.
>The boards of directors of both AT&T and SmarTalk have approved the
>transaction. The companies expect the transaction to close in the
>first quarter of 1999, prior to the conclusion of the bankruptcy
>proceedings. The transaction is subject to bankruptcy court and
>regulatory approval and certain other conditions.
>
>At signing, AT&T has made debtor-in-possession financing immediately
>available to SmarTalk.
>
>SmarTalk's Chief Executive Officer Erich Spangenberg said, "The Board
>determined that this transaction provides the best means for insuring
>uninterrupted prepaid calling card service to its customers, retailers
>and distributors and maximizes the value of its corporate assets."
>
>SmarTalk was advised on the transaction by Salomon Smith Barney,
>Credit Suisse First Boston and Hennigan, Mercer & Bennett. AT&T was
>advised by TD Securities, a subsidiary of Toronto Dominion Bank, and
>Wachtell, Lipton,
> Rosen & Katz.
>
>SmarTalk is a leading provider of prepaid calling cards and prepaid
>wireless services. Based in Dublin, OH, SmarTalk maintains
>distribution agreements with the U.S. Postal Service and leading mass
>merchandisers, consumer electronics retailers, supermarkets, hotels,
>home office superstores and convenience stores throughout North
>America and the U.K.
>
>AT&T is the world's premier communications and information services
>company, serving more than 90 million customers, including consumers,
>businesses and government. The company has annual revenues of more
>than $52 billion and 119,000 employees. It runs the world's largest,
>most sophisticated communications network and is the leading provider
>of long-
>distance and wireless services. AT&T operates in more than 200
>countries and territories around the world. SOURCE AT&T Corp.
>
> -0- 01/19/99
>
>
>
>
>01/20 10:54 Nasdaq Changes Status of Trading Halt
> in Smartalk Teleservices
> And <SMTK.O>
>
> Nasdaq Changes Status of Trading Halt in Smartalk
>Teleservices
>
> And Requests Additional Information from Company
>
> WASHINGTON, Jan. 20 /PRNewswire/ -- The Nasdaq Stock
>Market(SM)
> announced today that the trading halt status in
>Smartalk Teleservices
> ("SMTK") was changed to "additional information
>requested" from the
> company. Trading in Smartalk Teleservices ("SMTK")
>had been halted on
> January 19, 1999 at 4:14 p.m. for News Pending at a
>last sale price of 1
> 29/32. Trading will remain halted until Smartalk
>Teleservices ("SMTK") has
> fully satisfied Nasdaq's request for additional
>information.
>
> Since its debut as the world's first electronic
>stock market, The Nasdaq
> Stock Market has been at the forefront of
>innovation, using technology to
> bring millions of investors together with the
>world's leading companies. It is
> among the world's best regulated stock markets,
>employing the industry's
> most sophisticated surveillance systems and
>regulatory specialists to ensure
> investor protection and a fair and competitive
>trading environment.
>
>
>
>
>
>
>_________________________________________________________
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>
>
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