Tom is correct about the discount. I have played most of the back doors that Tom has referenced and the pattern is always the same.
Per the June 30, 1999 Form 10-Q, MKTY had 10,822,116 shares outstanding. On July 9, 1999, they closed on a private placement and raised net proceeds of approximately $12.65 MM through the sale of 801,223 shares. That brings the total number of shares outstanding to 11,623,339.
They need a total of $22.5 MM to exercise their option to purchase 3.0 MM shares of PLUG prior to or concurrent with the IPO. They have already announced that they have the financing in place so it is safe to assume that they have a commitment for approximately $10.0 MM.
Assuming that MKTY exercises their option, they will own 13,704,315 shares of PLUG subsequent to the IPO. If the stock trades at $30 per share, a generous assumption, the shares are worth approximately $411.1 MM. Discount that number by 40% for tax and liquidity considerations, subtract the $10.0 MM in new debt, and you are left with approximately $236.7 MM. Divide this balance by the 11,623,339 shares that are outstanding and you have $20.36 per share. Add $3 for the remainder of MKTY and the stock is still overvalued at the current price.
If PLUG trades at $40 per share, MKTY will have PLUG shares with a discounted value of $27.43 per MKTY share. Not a lot of upside at the current price. |
