Incomep,
To simplify matters even more, just ignore the 1.35mm "value" of the warrants. They are fluff numbers intended to put some numerical value on the warrants. The prefer holders DO NOT lose, ever. We should be so lucky to participate. If VLNC stock price falls, they get more stock. A lot of the prefer holders short the stock in anticipation of conversion, and the lower the stock price, the more shares they will receive. These guys like it when the stock price falls. Also, companies like VLNC that resort to prefer convertible financing are in such poor financial shape that they can't get traditional loans without having to pay extremely high rates, if at all. My experience tells me that these companies usually fail. Stock price goes down for a number of reasons. The dilution will have a supply and demand effect, with excess supply that has to be absorbed. The companies fundamentals are poor, and deteriorate as cash is spent and sales are lagging, still. I'm just speaking in general, referring to the average preferred convertibles. In the case of VLNC, its a story stock that may never play out. They have no sales of any significance . They have to make their Poly Lith battery technology work. It may or may not work, well see. Assuming it works, they they have to make product and sell it. This is harder than they think, since they have to compete with proven battery suppliers. If you were a laptop manufacturer, would you go with VLNC who has only made prototypes, or would you go with a battery producer whose been in the marketplace, and has demonstrated reliability, delivery and financial strength to insure they will be in business 6 months later. These are just my thoughts. Do NOT use my rambling for investment purposes. For the record, I'm short VLNC.
chester |
