[ Bad News or Good News? ]
ILNK today announced that they are making a private placement of shares at below the market price. As a reaction, the share priced moved up! Read about if yourself:
biz.yahoo.com
Here's my summary. Winter Harbor (WH) lends $2 million to ILNK. WH receives warrants to buy 500,000 ILNK shares at $4.97. ILNK now has $2 million in debt. WH has warrants with an intrinsic value of $2 million at the time of the announcement, which has increased to $3 million during the last few hours. This does not count the time value of the warrants, nor the $2 million that ILNK owes WH.
Later, WH will add $10 million to the $2 million loan, and exchange the total $12 million for preferred shares convertibale into 4.4 million shares of ILNK common. This values ILNK shares at $2.72. As a special bonus, WH will receive warrants to buy 10 million ILNK common at $6.2. At the time of the announcement, these had an intrinsic value of $28 million, but today has increased to $48 million.
If WH completes both parts of the deal, converts preferred to common, and excercises the warrants, they get a total of 14.9 million shares for a total of $76.485 million, or $5.13 per share average. As I write, the bid is 11, giving the shares a market value of $164 million, more than 100% profit on paper. Of course, they have no real profit until they sell. What will that do to the bid price?
This news should make the ILNK price crash, but instead it went up. Can anyone explain this? The "meat" of the deal is $12 million for 4.4 million common, which means that WH and ILNK have agreed on a fair share price of $2.72. |
