Zeev, in your experience with the dozen or so companies you are familiar with which have tanked or become severely crippled after issuing floorless securities, are there any common threads between the companies?
For instance: Total capitalization versus percentage of floorless issued? Management's equity ownership percentage exceptionally low? In retrospect, there was suspected collusion between the CEO and/or CFO with convertible's owners? Any common threads at all?
From what I have been able to learn, the only common thread I can come up with is that the companies taking the floorless route are already on the ropes and seek this type of financing in desperation... this is, IMHO, hardly Harken's situation assuming the accuracy of the Strain reports on Harken, many reputable analyst's opinions, and management's statements.
In reviewing all the posts on the SI bulletin board and those on the YAHOO thread where a serious attempt has been made to interpret the implications of the preferred "F" issue by several apparently knowledgeable posters (as to the reasons why management would raise capital in this manner), the conclusions seem to be:
Management only issued the floorless because shareholders were adamant that no add'l dilution should take place by issuing add'l common.
No shorting against the convertible can effectively take place until after the results of the next round (July - September time frame) of drilling are known.
Management isn't even using the $15mm, has it in the bank and can pay off the preferred anytime they want so it's a non-issue.
The amount of oil HEC is sitting on is so vast that major oil companies with deep pockets will rush to get a piece of HEC's Colombian action when reserves are moved to "probable" and, therefore, the $15MM is inconsequential relative to HEC's total capitalization as it can be paid back virtually on call.
Seev, the way I see it, management has possibly bet the company on the success of the next few month's drilling. At present I have to believe they know there is no risk because they know, for a fact, what they are sitting on.
Could HEC's management be so supremely confident of success that the risk has been totally discounted and they are blind to it (again, perhaps they KNOW FOR A FACT what they have so in their collective minds, there is NO RISK) or, just what? The current CEO is thought to be a financial genius and this is why I am baffled by why he would enter into such an arrangement if it is as dangerous as you say it is.
What could be his possible motive for entering into what all agree is a highly questionable financial arrangement unless he IS absolutely convinced there is NO RISK?
Two final questions, have you been monitoring the Yahoo thread's (HEC's) commentary on this subject, if so do you have any comments? Do you have any interest in HEC, long or short, personally? If not, what is your motivation for becoming so involved in this controversy?
Thank you for responding.
Gator II |
