A few more thoughts about these filings, although I have yet to read them all yet. Lets recap the situation at CDRD.
We have a company with an idea to launch 2 satelites to provide the US with CD quality radio. They propose to build and launch by the year 2000, and until the end of year 2000 (assuming all goes according to schedule) there will be no revenues.
Initial stock float was about 8 million shares, currently 12.5 million shares outstanding, plus 5 million convertable preferred.
Now the following has happened:
1) The company is going to try to exchange the preferred for yet another convertable preferred. This will no doubt be at a steep discount. It puts off the dilution towards a later date, but generates no proceeds for the company.
2) a note will be floated to raise 150 million dollars gross. I dont yet know the terms or interest rate, but one can safely assume it will be on the high side.
3)3.5 million shares of common stock (a 28% dilution) will be part of the exchange and/or note offering. This will bring the float to 16 million shares.
4) the company has now raised 468 million dollars of the 660 million estimated necessary to get the birds off the ground and the infrastructure built. They estimate that they will need another 100 million in the year 2000 to continue operations, and hope to see revenue by the beginning of year 2001.
5) That leaves $300 million dollars worth of financing left to obtain. In the meantime, sharesholders will be diluted by the convertable preferred (albeit at a later date), as well as 2 million existing options (exact terms unknown to me at this time), and whatever other equity financing is decided on, to raise the additional 300 million dollars.
This still leaves me with the question of how this debt will be paid for since there are no revenues for 3 years?
Secondly, it would appear that this was the good news that the current shareholders were waiting for. The stock did nothing on the news. Nothing. What is it exactly that is going to move this stock up over the next 3 years? You are not going to get any surprise earnings, that we know because there are no revenues!
The company is in a holding pattern now for 2 more years until the satelites are launched. Between now and then , the only news that will be coming out is more dilution and potential scheduling setbacks, or perhaps even competition from the other company who was awarded the other FCC license.
At 19 dollars you own a company valued at $304 million dollars , based on the 16 million shares of common stock. This does not count the convertable preferred (which will still exist) the options, and the potential future equity offerings. You have apprx. $285 million dollars in long term debt to service. Again, I dont get it. Why hold the stock now? There will be NO revenues and no profits for at least 3 years if ever. The potential for setbacks is enormous and all the possible good news is now out.
And about the short position that has been keeping the stock afloat lately.....you will lose that support the second the 3.5 million shares join the float......in my opinion, at this point in time, CDRD is a pipe dream investment and nothing but a story stock, and extremely pricey .....best of luck to all...;^) |
