Art,
>> I'd like to see a different spin from others [about the debentures ]. <<
We should have a pretty good idea of the debenture details tomorrow when the placement of the debentures has been completed.
If Toshiba is one of the initial purchasers of the debentures, it probably did some arm twisting to obtain a stake in SanDisk. It was only a 1 or 2 years ago when people on SI thought that the purchase of SanDisk would have been a smart move by Kodak.
If insiders can purchase a portion of the debentures, it could be interpreted as a positive sign for the direction of the stock.
Apparently, SanDisk needed the money quickly. I believe that a secondary offering of 6M+ shares of common stock at $18 or $19 could have accomplished the same thing without incurring interest expense. But, I don't know the intricacies of this type of financing. For example, would underwriters have to be involved?
I see this offering costing the corporation 2 1/2 cents (exclusive of tax) per quarter in earnings for the next 5 years. Additionally, there will be a 10% dilution of stock.
Of course, the preceding is only half of the picture. SanDisk will have the use of $150M for 5 years, and if things go well for the company, there will be no need to come up with additional financing to pay off the principal.
In addition to your comments about TSEM, the proceeds from the sale of the debentures might allow SanDisk to maintain its position in UMC, which has been doing quite well on the Taiwan Exchange recently. SanDisk reported a Q3 market price of T$30 for UMC. Recently, the price has been between T$45 and T$50.
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If SanDisk still owns 133.2M shares of UMC, the current worth of those shares is at least T$6,000M (US $176M) -- still a pretty good gain on the original investment of US $51M.
NHP |
