Corel--$100 in 1998 Message Board

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Technology Stocks : Corel--$100 in 1998

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To: Lou Pedron who wrote (2128)	4/7/1997 4:17:00 PM
From: A. Hayer	of 2329

<< The deal also gives Corel the rights to 5 percent of future royalties from Hoffman and the right to expand its stake up to 25 percent, she said. In all, the deal is worth about $22 million - Margaret Kane.>> To expand on this: -Corel receives a 1 million cash payment, plus a 22% equity stake in Hoffmann. -Corel receives a 5% royalty on all Hoffmann sales with a 12 million cap. The royalty payments stop when the cap is reached or if there is an IPO, whichever occurs first. Hoffmann anticipates an IPO within 18 months. -Current Hoffmann sales are around 7 million. Hoffmann expects sales to be around 20 million at the time of an IPO. Cowpland suggested 5x sales for an IPO, giving Hoffmann a market cap of 100 million at the time of offering and therefore Corel's 22% would be worth 22 million at that time. Based on this, if Hoffmann has current sales of 7 million, and can be evaluated at 5x sales, the current market cap of Hoffmann may be 35 million. Corel's 22% equity stake is then worth (35x0.22) 7.7 million at current levels. So the deal is really worth 8.7 million (7.7 million equity plus 1 million cash), or 23 million if you are using future projections. ah

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