(rcn) Thoughts re: 2/29/00 news on financing
I'm going to try to string together some disparate thoughts and put forth a reasonable favorable scenario based on what we do know from the news release pertaining to the financing.
First, I'm sort of in the school that I'd like to have a bit more information before I make up my mind on how I'll vote. I have a call in to tsig to ask questions.
Second, I'm of the belief that tsig has come along way since the prior PP. When tsig negotiated that prior arrangement, tsig was unfocused with too many ideas of which too few had been implemented by a cast of talented individuals not working together as a team. Tsig negotiated from a position of weakness and had to accept terms offered. Now, tsig is focused, has deals in place some of which are demonstrating the viability of the model with major entities being carried through by a coherent management TEAM with a proven track record. Thus Tsig could shop for better terms.
But without the capacity to ask specifically who this money is from and what are the exact terms placed upon it beyond the euphemisms provided for an r/s, what are we entitled to ask prior to making an educated decision on how we should vote? Many of us had been through the debacle before and, therefore, understandably jaded.
Now I was thinking (God forbid) and couldn't fall asleep. What I ultimately came up with made me break my self imposed rule of not posting too late at night or too early in the morning as I had done before under the stress of tsig's prior demise due to how my physical health problems (I take medicine for Parkinson's like symptoms) directly effected my mental health last summer. Now I'm however not writing out of angst.
What questions can we reasonably ask without overstepping the SEC restrictions of "basic terms"? What will the proxy tell us? How can we use these message boards constructively, for a change, to generate a list of questions that we can put forth collectively as shareholders in order to get an official response prior to the vote so we can make an informed and confident decision?
Well I thought of several broad questions right off the bat that tsig should be able to answer in such a way as to give an overview.
First, since tsig has been in a cost containment mode reducing its burn rate, what exactly does tsig intend to do with the large amount being offered? Acquisitions? Staffing? Expansion or implementation or existing and future deals? Plus more importantly, how ardently is the company going to keep its focus with the potential profligancy that could occur with such largess?
IMO tsig squandered resources the last time around on offices, executives, and too many disparate ideas trying to be implemented simultaneously. I'm in agreement that tsig learned from its mistakes. However, I'm concerned that tsig use any new financing in such a way that it maximizes share holder value.
My second line of questioning was partly provoked by an article I read today about how Borders has enlisted Meryl Lynch to bolster Borders Books share price through "recapitalization, a leveraged buyout, or a business combination with another company."
Thus, what exactly is the "prominent NYC investment" bank's role as an "agent"? Is this an ongoing role beyond just the procurement of investors from amongst their clients? What will this agent's ongoing role be? Is an agent in essence a quasi-underwriter? Will this agent also assist in future "recapitalization" or helping to broker suitable acquisitions? Will this agent make the big boys on Wall Street aware of little old tsig- the engine that said it could, and could?
My understanding is that if an investment bank of this type says that it can deliver up to an amount as high as $40 mill, that some of this banks most prominent customers have expressed interest after their opinions were solicited. However, these type of customers aren't of the penny playing variety with discount day trading accounts. These clients still pay full service for their brokerage advice and would look unfavorably at paying high commissions that would represent a high percent they'd have to recover before receiving a return. They wouldn't be favorable toward non-marginable equities since REAL money is made through leveraging one assets.
Now consider this scenario. An R/S is enacted. The share price is increased artificially but, and this is a big but, that throws all the adverse r/s analogies out the window, new money is prepared to purchase the higher priced post split stock offered privately at or near the post split price which has a floor where the degree of the R/S is determine by what the floor is and what the stock price is at the time of the reverse.
Couldn't this happen? Actually, minus the specifics about the floor, it will happen. The investors are in place through the investment bank for up to $40 mil., which is a HUGE amount for a company tsig's size. I believe the amount AMZN just recently secured was an additional $80 mill. $40 mil ain't charity or monopoly money. This is major interest.
Now why would the new investors PP holders invest in a company not at a discount which just went through an r/s? Seems sort of foolhardy, because even JP Morgan himself would have to scream out loud and at the top of his lungs to get Wall Street's attention to a stock priced post split at levels barely qualifying for a Nasdaq listing.
But here comes the slick part.
With the share count significantly reduced, even with the additional money raised via the PP, stock has to be used for additional acquisitions. The authorized remains the 300 mill. which gives a lot of latitude post split for the creation of shares though the novice will immediately construe this negatively as dilution diminishing share holder value rather than recognizing that acquisitions enhance stock holder value, since revenues are also increased or, in other words, revenues per share increase or stay the same since revenues increase at or above the share count through the acquisition of revenue generating companies. Capiche?
Thus the key word becomes "recapitalization"..
Hmmm what could this mean? Possibly a secondary offering that functions like an IPO for an already public company.
Say what? The secondary offering fulfills the listing and underwriting requirements of the Nasdaq. Thus tsig.com gets "IPO'd" , in essence, onto the Nasdaq with all the hoopala that that entails with say a secondary offering of maybe an additional 20% of the company offered and priced well above what the investment bank's PP participants paid for their shares.
Now what would this scenario do to the price of what, in essence, are your pre-IPO shares even after one of those very scary creepy crawly r/s's ?
Plus what would such a secondary offering due for tsig.com ability to expand and acquire through the capital generated by that secondary offering?
I'm obviously dreaming, or some would say I'm being delusional again. So, I better get some sleep.
z (spellin' not checked)
|
