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Strategies & Market Trends : Floorless Preferred Stock/Debenture
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To: Zeev Hed who wrote (549)7/8/1999 12:01:00 PM
From: Greg Hull  Read Replies (1) of 1438
 
Zeev,

Last week CMGI sold a Reg D private placement for $375M. From the 8K filed yesterday:

"Each Tranche may be converted, at the holder's option, into shares of common stock, $0.01 par value per share (the "Common Stock"), of the Company at an initial conversion price per share equal to 150% of the average of the closing bid prices of the Common Stock on the Nasdaq National Market over the ten consecutive trading days immediately preceding the date of original issuance of the Series C Preferred Stock. The initial conversion price remains in effect until the conclusion of the pricing period in respect of a particular Tranche.

Thereafter, shares of the Series C Preferred Stock for a particular Tranche are convertible into Common Stock at the conversion price set for that Tranche. The conversion price for each Tranche equals the ten day average of the closing bid prices of the Common Stock beginning on the initial trading day for the particular Tranche's pricing period multiplied by 90.75%. The pricing period for Tranche 1, Tranche 2, and Tranche 3 begins on the 15th, 45th and 75th calendar day after the date of original issuance of the Series C Preferred stock, respectively. The initial conversion price and the conversion price calculated for each Tranche are subject to adjustment for certain actions taken by the Company. In addition, in no event will the conversion price calculated for each Tranche exceed the initial conversion price."

This sale was also reported in Red Herring:
redherring.com

I developed the impression that these floorless offerings were the province of only very small companies that had no other options for raising capital. Are the implications for a large cap company like CMGI less onerous, or should this be taken as an indication that not all is well with CMGI if they need to raise cash this way?

Interested in any thoughts you might have on this,
Greg
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