Regarding GBLX's intention to create a tracking stock for Global Centers, am I correct in my assumption that a certain percentage of that tracking stock will be sold to the public through an IPO and the remainder retained by GBLX; or, is it possible that current shareholders will participate via a rights offering?
My understanding of a tracking stock would be that all of the stock must be distributed to existing shareholders. This makes sense. Remember, Tracking Stock is just a piece of what is already owned by the shareholders, and after the company is logically broken into 2 or more pieces, the same people own all the pieces.
I assume that the goal will be to raise as much capital as possible and it would seem that each of the above options would accomplish the same end, but with a rights offering, current shareholders would be in a better place!
Am I thinking about this with sufficient clarity or missing something?
In a Tracking Stock, where pieces of the company are grouped into bundles and given stocks of their own, no new capital is raised. The market cap of the company may rise and thus enrich the shareholders, but no new money is raised. Shareholder value is increased to the extent that holders, and prospective holders, value the sum of the parts more than they did the original whole.
This can happen for several reasons, but I think the main one is specialization. Existing and prospective holders may form new opinions, once they can own one piece and not the other. Maybe someone believes strongly in Global Center, but doesn't think highly of the wholesale fiber business. Now that person could sell the Crossing to someone who valued it more than he did, and use the proceeds to buy Center.
GBLX has generally been considered to be shareholder friendly so I am hoping for a rights offering.
If they want to unlock hidden value, a TS may be best, and you'd get your shares. If their goal, however, was to raise money, then the Spin-off is the more likely option, since that would enable them, I think, to sell shares, which they could not do in a tracking stock.
Spin-offs usually move shares to the existing shareholders as well, but management has the option of selling shares to the public which raises cash.
Only advantage to an IPO would seem to be that the investment bankers could test the waters and raise the price if the climate were right! I have to assume that GBLX will have to go the route that raises the greatest amount of $ but if all things were equal, I imagine a rights offering would be preferred by shareholders. Am I missing something or do I have the whole scenario wrong?
I'm not at all sure why people refer to what GBLX might do as an IPO, since GBLX is already public and cannot do so again. |
