If legit, reported deal not that appealing.....
My first reaction when my son called me last evening to alert me of your post was that it might be a hoax, given the timing, and my inability to confirm on any business wire, including the PRNewswire website. I decided to sleep on it.
Now that Reuters is confirming, I can't say I'm all that crazy about the proposal.
First, there is no statement about any cap on the issuance of TSQD shares to Mr. Ronning and his insiders prior to the year-end completion of the deal. In the 10-Q for the first quarter, outstanding TSQD shares were 10.1 million, with plenty of option shares for the insiders, exactly how many hard to tell, bringing eventual total to probably 14-15 million. Will this expand in the next six months to their benefit and to the detriment of outside shareholders?
Second, why the discount? DRIV is taking $1.2 million in cash, and then trading shares for shares, except the numbers are different, 2.65 million for 3.0 million, an 11% haircut for the TSQD side. Why? The cash is extra consideration enough for TSQD, if any need be provided, and the windup costs of TSQD are clearly to be borne by its shareholders, witness the $7.2 million reserve. This will be funded, as necessary, by selling some of the subject shares before any distribution.
If the "cashless exercise" of the Ronning option is now done, the value of TSQD just for those shares is $105 million, not $93 million, why again the discount? (Leaving the stock now in TSQD with no internal deal on the table would be interesting in terms of market valuation of TSQD after knowledge the option exercise.)
The structure may reflect Mr. Ronning's need to bend over backwards to avoid self-dealing as to his TSQD 40+% share interest. Trouble is, the rest of us in that group take the hit, while he offsets the sting of the "discount" as a major holder of DRIV.
All in all, even though it achieves desired closure, I am not crazy about this proposal.
David |
