Tuck,
I think you are reading more into this than you should. First, there is no dividend according to the release, so looking at it like convertible debt with an interest yield is erroneous. Second, "customary adjustments" simply means that the conversion price would be adjusted for splits and the like. You imply that this has some "floorless convertible" characteristics, an implication which is flat out wrong.
Finally, if you look back, I think you'll find that Intuit bought stock at a little over $50, market at the time. They did receive warrants to buy more at the same price, but that was simply that "kicker" for making a very large, illiquid investment at a price which was, at the time, an all-time high. BTW, I think you'll also find that the price declined after the investment, dipping into the 30s and then, a few months later, into the 20s (we had the pending mergers hanging over the stock at the time) before recovering and then taking off for the highs of a few months ago.
Bottom line is there is no reason to fret over this deal (other than, perhaps, the unfortunate timing of its pricing) and plenty of reason to find comfort in it. $244 million dollars is a helluva confidence vote and a strong incentive to help make the model work. Could S1 have gotten by with the piles of cash on hand? Probably. Was getting these five strategic investors to make such a visible commitment to the company's future something they could pass up? Hell no. This deal is worth loads more than the $244 million of cash it put in the hoard.
Regards,
Bob |
