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Gold/Mining/Energy : American International Petroleum Corp
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To: John Q Binford who wrote (9068)8/12/1998 10:19:00 PM
From: Richard E. Murray  Read Replies (2) of 11888
 
I don't see the warrants offered with the bond sale as placing a $1.50 cap on the stock price. To get to the warrants, you first have to come up with $100,000 for the bonds. This means they are not an option for most investors. What the perspective investor will need to determine is whether they believe the stock is worth 4.6% more than what they are contemplating paying for it since that is the amount of dilution that is going to occur when the price goes above $1.50 (2.5M warrants/54M common share outstanding at present).

I also think this convertible situation is way different than the previous one. In the earlier case, the exercise price floated with the stock price. This created the death spiral where conversion lowered the price (due to dilution) which lead to even more conversion, and more dilution, and so on. Here the dilution is tied to a specific number of shares vice a dollar amount (i.e., with an indeterminate number of shares).

It's also noteworthy that the conversion proceeds should be sufficient to cover next Feb's debt service. We may see retained earnings from the refinery sooner than people expect.

I believe this bond offering leaves the company in a much better position than it's been up to this point.

-Rick
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