The plunge in share price raises concern about the unusual call provisions associated with GNSL common. From 2/11/00 prospectus;
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Call Rights
The terms of the callable common stock and PerkinElmer’s call right are set forth in the second amended and restated certificate and the related governance agreement. The callable common stock together with all securities convertible into callable common stock may be redeemed, in whole, but not in part, only at the direction of PerkinElmer. PerkinElmer’s right to cause us to redeem our callable stock for a two year period can first be exercised on the earlier of 181 days following completion of this offering or 270 days after January 27, 2000.
Article V of the certificate provides that the redemption price on any date of redemption shall be the greater of:
- 120% of the 30 trading day trailing average closing price of our callable common stock ending on the day before PerkinElmer notifies us to exercise the right;
- 120% of the last reported sales price per share on the trading day before PerkinElmer notifies us to exercise the right; or
- the following price per share based on the number of days that have elapsed after the date PerkinElmer first can exercise its right to cause us to redeem our callable common stock (i) $6.75 for one through 182 days (ii) $7.00 for 183 through 365 days (iii) $7.50 for 366 through 548 days and (iv) $8.00 for 549 through 730 days.
In the event our board receives a bona fide firm acquisition proposal that is not subject to further due diligence and not subject to any financing contingency, at a price that our board is prepared to accept, the purchase price per share will be the price set forth in the acquisition proposal, whether higher or lower than the price described above. In addition, if we receive such an acquisition proposal and PerkinElmer does not exercise its call right within five business days of receipt of the acquisition proposal, PerkinElmer may not exercise its right until the earlier of (a) the withdrawal or rejection of the acquisition proposal, (b) the modification of the price or value of the acquisition proposal in a manner adverse to us or to our stockholders; or (c) the 180th day after the receipt of the acquisition proposal.
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The two year call period began on 10/23/00. Lockup ended on 11/1/00 and the stock price has fallen steadily since (presumably aided by resulting tax loss selling). The 30 day trailing average is now about $9.5 and will be dropping rapidly unless we see a dramatic recovery when tax selling ends. Fortunately, the call price has a floor of $6.75, which will control if the 30 day average falls below 5.625 (5.625 x 120% = 6.75).
It seems to me that PerkinElmer is unlikely to ever get a better chance to exercise its option. They should have little trouble in holding the price down if they choose to do so. There may be reasons for PE not to order the call, but I don't see them. The arguments on the other message boards seem weak. It looks like they have the opportunity to get GNSL at a substantially undervalued price. Comments?
Merry Christmas All
SMH |
