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Technology Stocks : CDRD (CD Radio)
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To: blast_investor who wrote (26)4/10/1997 2:09:00 PM
From: Fred Puppet   of 904
 
Secrecy of pricing is common during private placements. The price is almost always better than the market price. This is a bad deal for the current shareholders, so management does not want the current shareholders to know the price.

The most common technique for hiding the price is to sell common shares and warrants together. For example, company XYZ selling at $10 per share might announce: "An investor group paid $10 million for 1 million common shares of XYZ plus warrants to buy additional shares at prices ranging from $8 to $15". The management wants people to believe newly issued shares were sold at $10 each. NOT!

Returning to CDRD... A 5% preferred convertable share has a value significantly greater than a common share. However, if they are being sold at a discount to the common, management will not want current shareholders to know this. Therefore, they are willing to announce the dollar value of the sale, but not the number of shares. However, the next 10-Q should contain this information.

My personal guess is that the $135 million of preferred is convertable into 40 million common shares. The conversion would raise the total number of shares outstanding from 10 million to 50 million. Is this a fair deal, at $3.33 per preferred share?

I really think it is fair. I'll explain why when I have more time.
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