It is not normally a good thing when the parent liquidates a portion of its position in an IPO. In the case of PCQT, however, the sub has been such a drain on the parent that HYPR/PCQT had to get a $2.0 MM bridge loan from Motorola two weeks ago. HYPR, which should actually be profitable after the spinout of PCQT, needs to replenish its cash reserves. The IPO is going to be its only opportunity so I would not read too much into the fact that they are selling shares.
There may be a bit of a back door play in HYPR. As of July 28, 1999, HYPR had 15,000,671 common shares outstanding. There were also preferred shares outstanding that are convertible into a minimum of 4,786,600 common shares. Additionally, there were options and warrants on 6,436,694 shares at an average price of $1.70 per share. If these options are exercised and the proceeds are used to purchase shares on the open market at the current price of 8 1/4, this will result in additional net dilution of 5,355,965 common shares. If you add the current number of common shares outstanding and the potential dilution from the preferred stock and the various options, there are approximately 25,143,236 common shares.
HYPR will be offering 1,950,000 of its PCQT shares in the IPO, generating, at an offering price of $13 per share, approximately $25.35 MM in cash, or $1.01 per share. HYPR will be retaining 7,850,000 shares of PCQT. Assuming a price of $13 per share, these shares will have a value of approximately $102.05 MM. Discount this amount by 40% for tax and liquidity considerations and you are left with $61.23 MM, or $2.44 per PQT share. Subtract the $2.44 and the $1.01 in cash from $10 1/8, the current price of HYPR, and the remainder of Hyperfeed is currently being valued at $6.68 per share. Assumed that PCQT pops 50% and the remainder of Hyperfeed is currently being valued at approximately $5.46 per share.
I would not play HYPR unless it falls down to $9. IMO, the PCQT IPO will probably do only moderately well. |
