Skip, We went through a discussion of this last summer, I think. In addition to that paragraph, you have to look at "out of the money" options and warrants, etc.. They move the total share count that will eventually be outstanding to something over 100 million, from the present 82.1 million.
SEC rules are peculiar here. Share count is used in per-share calculations, so the SEC does not allow all the shares to be reported in the "fully diluted" number, since doing so would lessen the "Net Loss per Share" reported number.
The additional shares that will be outstanding will of course have some dilutive effect on us, the independent common shareholders. And all of the shares will have an interest in a portion of the limited partnership operations. As your quotation suggests, that now stands at 39%.
I would not be surprised to see that 39% drop once again before we reach breakeven. Another funding will be necessary, which Loral will accomodate. By then it will be clear to all that handsets are moving into users hands at a steady rate so that we will get through to "2G"--satellites and handsets that can handle HDR-type data rates.
The shift to the right in revenue ramp-up is just fine to Mr. Schwartz, I believe. He has had a cushion built into his financial plans from the start. Eventually, LOR will control quite close to 50% of the limited partnership. For some reason, it appears, Schwartz does not want LOR to have to consolidate the limited partnership anytime soon. The redeemable preferred shares seem to provide several benefits: They improve the financing cushion he wants. They help avoid consolidation of the limited partnership. They allow LOR to provide financing again at the limited partnership level.
Just some thoughts without having re-run the numbers recently.
Best,
JS |
