And it's important to note that in doing this debenture, Zitel creates an unstable equilibrium (I've always thought "disequilibrium" would be a better term). That is, the offering creates dilution, which puts downward pressure on the stock price; as the stock price goes down the deal becomes progressively more dilutive, which puts further downward pressure on the price. Other things being equal, this should cause the fall to accelerate.
But speaking of "other things", can someone please explain to me why Zitel has used half the money raised for aquisitions, rather than trying to save its core business (or even growing its putative Y2K business)? This is really bizarre! As others have said, it certainly seems like a vote of no confidence in both Y2K and storage subsystems: they seem to have decided their best hope for survival is in their software. But as I understand it, that business was negligible compared to the storage systems, and it's hard to see how merging with these other firms increases their chances of survival.
I would also think this would spark shareholder lawsuits (always assuming there is any capital there to sue for), both because everything they are doing seems so negative for shareholders, and because they are taking huge, arbitrary, dangerous steps without putting anything to a vote.
Someone please explain. |
