News and Questions on Dilution
If anyone hasn't seen the news:
biz.yahoo.com
The news says that, as expected, CDRD sold preferred shares. They had the option to sell $200 million, but are chosing to sell only $135 million. They will need more financing in the future.
My question is, what is the price per preferred share? This should help us determine the fair price of a common share, which would be less than that of the 5% preferred. It appears that the company wants to hide this information, which makes me suspect that the price was low.
The latest 10-K says preferred share pricing information is confidential, but does say the following:
1. After selling the preferred shares, the number of authorized shares will be increased to at least 100 million.
2. To ensure that all of the preferred shares can be converted to common shares, the number of shares authorized but not issued must be at least 1.5 times the number of preferred shares.
Since there are about 10 million shares issued, the 100 million authorization would leave 90 million authorized but not issued, which is 1.5 times 60 million. So, I'm guessing that the company was planning to sell 60 million preferred shares for $200 million, which is $3.33 per share. Now, they actually will sell only $135 million worth of preferred shares. The question is: Into how many common shares can these 5% preferred be converted?
If CDRD is willing to sell 5% preferred shares for $3.33, why are people paying $12 for common shares? |
