| |
Doug,
Overall, this looks to me not as a "need for cash" situation for S1, but an extension of its existing network of strategic alliances, adding global insurance players to its existing network of banking players. And those players making their investment during a period in which the equity markets are priced more favorably for them.
Perhaps someone else has a different perspective.
Well, that's my perspective, too. This is a good deal for them, less so for S1. So why did S1 make such a deal when it didn't need the cash? Because S1 is in some way negotiating from a position of weakness. I compare this to previous deals -- such as the Intuit deal -- and see this one as much less favorable. Thus my hunch that there are vulnerabilities, both competitive and legal, that are not yet well understood by the majority of S1 shareholders.
I'd like to see the filings detailing the circumstances under which the conversion price is renegotiated, and when that window is open. Looking for timing with patent dispute news, competitive inroads (ala CORI, though it's good to have IBM on our side now). Should the share price be below 34 bucks during this window, because of the above or something else, look out! Maybe I'm getting too paranoid. Most such deals involving common have warrants that raise similar manipulation issues (including the Intuit deal, I believe). But they don't create an interest expense for S1 pegged at peaky rates. My recollection is that this is a low premium compared to other deals, too. I.E. Intuit got options for $50 when S1 was in the mid thirties, if memory serves.
I think it'll be a lot easier now to write calls on S1, because it won't see triple digit territory for some time, IMO. Maybe if they win both lawsuits.
Cheers, Tuck |
|
