Frank, even though I'm getting back to a couple things with DS, I realize that I'm not "responding directly" to one of his posts. :)
By asking the following questions I realize I'm at risk of losing my status of Merlin around here, but ... :)
DS and all,
Having listened to the conference call a second time, I now realize what might be the source of the confusion about the method in which Spinco becomes a licensee of Qualcomm. Management (I think Jacobs, but not sure) was very specific in the Q&A period, when asked if Spinco will have to "pay" for licenses, that Spinco will get a "credit." Hearing that the first time, I gathered that as Spinco develops new patents it will get credits for payments that would otherwise need to be paid to Qualcomm in return for giving free access to Qualcomm. Hearing the CC the second time, I think the "credit" is probably more of an accounting issue.
All (that means you, too, Frank :)
An issue that hasn't been mentioned is that it's apparent to me that Qualcomm will own part of Spinco even after shares are distributed to Q shareholders though all the information I see indicates that not the case. I can't imagine Jacobs being the Chairman of the Board of a company with such a strong relationship with Q when Q doesn't retain a significant though minority interest in Spinco.
The press release kumar brought to us showing that the IPO will be for 10% of Spinco's business says that remaining shares will be "offered" to Qualcomm shareholders. What exactly does "offered" mean? Intuitively, "free" doesn't enter into that equation. :) I assume it means Qualcomm shareholders will be offered the remaining shares at the IPO price. Right?
And last, what does this mean for LEAPS? To keep this simple and ignoring the finely tuned nuances, let's assume that Spinco and the new Qualcomm (divested of Spinco) have the same market value. Let's assume that combined value is the same as Qualcomm's value today. That would result in Qualcomm's stock going down (but it doesn't matter because current shareholders would also own at least an equal value of Spinco stock when it is distributed, or is that wrong?)Because the LEAPS are contracts having to do only with the underlying common stock of today's Qualcomm, if the market value of Q goes down once the divestment is complete, the value of the LEAPS will also go down and won't be supported by anything having to do with Spinco.
Right? Wrong? Am I totally confused? And if I am, does anyone wanna place a bet taking the position that that I'm the only one?
--Mike Buckley |
