>Could you please explain the secondary stock offering by WIND on the 11th (12th) at $27. Is it >based on stock dillution? Why didn’t people jump out of the stock two weeks ago at $38.5? Or >was it just a market correction?
WIND had scheduled the secondary to fire off Friday, and priced the stock the night before. I am certain WIND would have preferred getting $38.50 for the stock, but the stock had corrected over the previous couple of weeks. The offering price was based on the market, not some calculated effects of dilution. However, this is not to say that the market did not adjust the stock to compensate for effects of dilution, but I don’t think dilution troubled the market, else why did it soar to $38.5 after announcement of the secondary offering? I think the market realized that overall the secondary was very good for the future of WIND and current stockholders in particular. I believe the price corrected recently because investors, including institutions, are for the time being afraid of leaving profits on the table, especially with small, illiquid companies. Consequently, for the smart investor, this is time to buy, not sell.
A few things to say about the secondary: We should start by welcoming all the new stockholders, with some 3.3 million shares. My sense is that most of these are institutional investors.
The float should now be about 10 million shares, with about 1.9 million new shares. In case you have not thought about it, WIND just gave pre-secondary shareholders the equivalent of about $2.5 dollars per share. Cash per share now should be well over $5. WIND now has so much cash (about $70 million) that you now see why they need to institute a poison pill to thwart an unfriendly takeover before the secondary. If an entity has access to credit (like Intel which routinely obtains Industrial Revenue Bonds), it could buy WIND and use WIND’s $70 million for a down payment. It could pay off the loan using WIND’s expected significant future cash flow from license fees. In other words, without the pill, Intel could buy WIND for nothing.
With its war chest full, 10 million shares floating, options being traded, and a mission to gain market share on top of a rapidly expanding Embedded Systems space, WIND is now set to make its mark in the world of computing.
Want the grand picture of what WIND’s future looks like? Check out www.ubiq.com, and in particular Mark Wieser’s page. Working as a loose cannon at the Computer Science Lab at Xerox PARC, he has coined the term "Ubiquitous Computing" for the embedded kind of computing WIND is championing. He presents a case that Ubiquitous Computing represents the third wave, which is just starting to be significant, and will ramp explosively for the foreseeable future. The first wave was the mainframe, a paradigm in which one computer relates to many people. It started after World War II and peaked in the late seventies. The second wave was the PC, a paradigm in which computers were one-to-one with people. It started in the late sixties, ramped much faster and higher than mainframes, and he sees it peaking about at the turn of the Century. The third wave, Ubiquitous Computing, consists of multiple (invisible) computers per person, and probably is the mature and last major phase of computers. The company that leads and dominates this wave will make wave one (IBM) and wave two (MSFT) giants pale in comparison.
Allen |
