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I was wondering to myself what the potential judgment in favor of LONE in the class action lawsuit would mean on a per share basis. During the period which I guess is under primary dispute, the first several months after the issuance of the debentures when the most damaging short selling took place, LONE's (then NAAC) share price declined from about $3 to $.8 and then lower, as we all know. There were 10 mill. shares outstanding before the reg. S debentures were sold and the fully diluted shares outstanding # LONE now uses is 16 mill.. By multiplying the per share loss of about $2.20 by the lower figure to be conservative we come up with a market cap. loss of 22 mil.. My understanding is that the class action suit is suing for an amount equal to loss of market cap. and that, because the suit is filed under the RICO statute, any monetary judgment would be automatically trebled. So multiplying 22 mil. by three gives us 66 mil, which on a per share basis, using the current shares outstanding number, is $4.125. That would be quite an increase in shareholder's equity and would be enough for LONE to pursue its acquisition strategy without any need for outside funds for awhile. What are the odds of LONE getting cash reimbursement of this amount? Very low in my estimation. For one, I doubt the defendents would allow this case to reach the trial stage. Before then--perhaps in the weeks or days before such a trial would begin, I believe the defendents would make every effort to reach a settlement and cap their potential liability. Such a settlement with LONE, even if it granted a majority of what LONE is seeking, would be but a minor blow the T.K. and the others, given my belief that their aggregate asset size is well more than $1 bil. and perhaps in the bil's. What is important to them is that they be able to conduct business as usual in the U.S. for their investors. If for some reason they found the U.S. markets closed to them, I don't know what they'd do. Reaching an undisclosed settlement with LONE in LONE's favor seems to me a small price to pay for this privilege. The second reason supposes that LONE wins in trial. If that were the case and if the defendents decided to resist paying, given that they are all offshore, how could LONE's attorneys force them to pay up? |
