Profit from WCOM fraud

Who will be able to profit from WCOM fraud?

Maybe prop traders, as they are able to short on downtick? Or this is still not enough?

Lojze

 

Why would anyone want to short WCOM now? The risk/reward ratio is piss poor. You can only make 20 cents on the short but the risk is still high.

 

as a long term trade ?

June 26, 2002


Competitors may benefit from the elimination of WorldCom’s 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 WorldCom’s entire reported earnings before interest and taxes (“EBIT”) 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 WorldCom’s 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. WorldCom’s 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 WorldCom’s unsustainable pricing pressure. AT&T’s core telephone business can be created by selling 0.32 shares of Comcast Corporation’s 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.

 

I'd take option 4, but I don't appreciate SWA trying to get me to pay double just because I'm a little larger than the average person.

 

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.