Translation: "We can't sell enough software to meet our cash needs, so we're going to augment our software sales revenue with stock sales cash flow"?
Looks to me like a variation on a floorless. Corel sells stock at 95% of the market price, but the agreement allows Corel to perhaps avoid a death spiral by stipulating a minimum "threshold price".
On the other hand, they are going to give warrants for 25% of the number of common shares drawn upon, which is (I believe) unusually rich (10% is typical). These warrants are struck at the same price as the common (i.e., 95% or market), and are relatively short term (35 days).
Make no mistake about it, there is but one principal purpose for the issuance of warrants to the "investors" in deals like this: to reduce the risk that the "investors" incur when they short stock to hedge their financing.
If you look at the market price of a 5% in-the-money 35 day Corel call option and add that value to the 5% discount from market, you will see that Corel is selling stock via an intermediary at a significant discount to market. They are transferring a fairly large economic value to the unnamed financial intermediary, in return for the liquidity and flexibility this equity line gives them. Whether this is ultimately in the best interests of the company's shareholders I do not know -- however it does encourage me to hold on to my current short position in Corel. Dying companies always seem to manage to outlast the best estimates of even the most optimistic shortsellers. Reality finally, eventually prevails, but it really is quite remarkable just how long this takes.
- Daniel
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