Wall Street Calls on Amazon To Open Books

An influential group of security analysts has asked Amazon (Nasdaq: AMZN) to provide detailed financial information to allay concerns that the Internet behemoth is teetering on the brink of bankruptcy.

The letter, sent Thursday, is the second sent to Amazon this month by the New York Society of Security Analysts' Committee for Corporate Governance. The group wants Amazon to provide more specific information backing up the company's statements that it has enough money to survive the year.

"The information being provided is not sufficient to reconcile estimates and pro-forma numbers with reality-based facts," said investment banker and committee co-chairman Gary Lutin.

No Time

The second letter was necessary, according to the society, because Amazon failed to respond to the first letter and because an Amazon spokesperson publicly stated that Jeff Bezos, Amazon chief executive officer, did not have time to deal with the letter.

"Amazon's management has publicly stated that they have neglected to give you my March 8, 2001 letter, which asks for board responses to issues presented by the Amazon Forum being conducted by the New York Society of Security Analysts' Committee for Corporate Governance," the society's newest letter to Seattle, Washington-based Amazon said.

Failing the Written

The committee had asked Amazon to cooperate in a November workshop to explain its cash numbers. The company declined to be available via phone but did agree to answer written questions.

Unfortunately, according to Lutin, the company's written responses "didn't provide any additional information" or tell the analysts where additional information could be found.

"The only thing they could identify was wrong was an assumption, that was supported by a couple of analysts, that creditors would not grant credit on available cash," Lutin told the E-Commerce Times. "No facts or examples were provided to support the assumption that trade creditors would base their decision on the cash balance of prior periods and abandon their conservative analysis based on working capital."

More Sleepless Nights

Once the darling of Wall Street and an icon for the brave new world of e-commerce, Amazon has increasingly fallen out of favor as critics question whether its business model can become profitable.

The stock has become so volatile that even Bezos has reportedly warned investors to be wary of purchasing it.

"We are not a stock you can sleep well with at night," Bezos reportedly said in an appearance on "Money Programme," a BBC show.

Tension Mounting

The company has also been involved in a very public battle with Lehman Brothers vice president of convertibles strategy Ravi Suria, over a report in which Suria said Amazon did not have enough money to survive 2001. The report drew a sharp retort from Amazon.

"You can't take this guy seriously," Amazon spokesman Bill Curry told the E- Commerce Times at the time of the report. "His report is chock full of errors."

Suria questioned the validity of Amazon's reported US$1.1 billion cash on hand. He placed the company's liquidity at $386 million and predicted that without a cash infusion, the company would "dip into negative territory."

Curry countered that Amazon is highly liquid, and that Suria pulls "so many of his numbers out of thin air."

SEC Investigation

The U.S. Securities and Exchange Commission (SEC) is reportedly investigating Bezos for insider trading because he sold about 1 percent of his personal stock holdings after receiving an advance copy of Suria's report, but before the report became public.

Curry was quoted as saying that the timing of Bezos' stock sale had more to do with the release of the company's quarterly earnings report because trades were prohibited until three days after earnings results were announced.