Howard, or anyone-Could you delve into this announcement and see if you can figure it out-it appears a win-win situation for IDEC, but I'm not really up on option trading:
SAN DIEGO--(BW HealthWire)--Sept. 4, 1997--IDEC
Pharmaceuticals Corporation (Nasdaq:IDPH) today
announced that it has made arrangements with a financial
institution under which IDEC intends to simultaneously
purchase and sell call options on its own stock in a private
transaction. The purchase and sale of the options have been
structured to result in no net expense to the company to
enter into the transaction. If the calls sold by IDEC (on up to
900,000 shares) are exercised and up to 900,000 shares are
issued, the company could receive cash which would total,
when combined with cash that could be received on cash
settlement of the calls purchased by IDEC (on up to
600,000 shares), approximately $42 million, or about $48
per share issued. "This transaction gives IDEC leverage
through the ownership of a call option on our own stock,"
said William H. Rastetter, chairman, chief executive officer
and president of IDEC Pharmaceuticals. "Should the market
price of our stock move up considerably, this transaction
would allow the company to receive the proceeds from the
issuance of up to 900,000 shares at a significant premium to
today's price. At lesser levels of stock appreciation, the
company would benefit from a cash infusion without
corresponding dilution. If our stock fails to appreciate, we
would neither issue new shares nor receive or expend any
cash at option expiration. Proceeds, if any, received at
option expiration would be used to continue to build our
business, for example, for possible manufacturing plant
expansion or new product acquisition."
The financial institution has advised IDEC that it may engage
in transactions, including market purchases and sales of
IDEC's securities, to offset its risk relating to the options.
Completion and pricing of the transaction, and the proceeds,
if any, received by the company at option expiration are
subject to market conditions, with the final terms to be based
on a number of factors, including the market price of IDEC's
common stock at the time of issuance of the call options. The
purchased call option will give IDEC the right, but not an
obligation, to purchase from the financial institution up to
600,000 shares of IDEC common stock at a specified strike
price estimated to be 10 percent to 17 percent above the
market price of the stock upon entering the transaction.
Rather than purchasing these shares, the company expects to
elect cash settlement of this first call option, i.e., to receive in
cash the difference between the price of the stock (if above
the strike price at option expiration) and the option strike
price. The first call option is "capped" which limits the
amount of cash which the company might receive at option
expiration while reducing the price of the option. Should the
price of IDEC common stock close at expiration below the
strike price of the first option, the company would neither
receive nor expend any cash.
The second call option, to be sold by IDEC, will entitle the
financial institution at option expiration to purchase from
IDEC up to 900,000 shares of newly issued common stock
at a specified strike price estimated to be 53 percent to 60
percent above the market price of the stock upon entering
the transaction. The sale of the second option will fully fund
the purchase of the first, resulting in no net expense to IDEC.
Should the second call option be exercised, the company
expects to deliver to the financial institution up to 900,000
shares of common stock (subject to effectiveness of a
registration statement covering the resale of the shares) and
receive as consideration, without deduction of underwriting
fees, an amount per share equal to the strike price of the
second call option. Should the price of IDEC common stock
close at expiration above the strike price of the second
option, delivery of shares at the strike price would be at a
discount to the prevailing market price. Such discount would
be offset to some extent, but perhaps not in its entirety, by
the proceeds received by the company from cash settlement
of the first option. Should the price of IDEC common stock
close at expiration below the strike price of the second
option, the company would neither deliver shares nor receive
or expend any cash to settle this option. Both call options are
exercisable only at expiration which will be on the same date
approximately 12 to 15 months from closing of the
transaction. IDEC Pharmaceuticals focuses on developing
targeted therapies for the treatment of cancer and
autoimmune diseases. IDEC's products act chiefly through
immune system mechanisms, exerting their effect by binding
to specific, readily targeted immune cells in the patient's
blood or lymphatic systems.
IDEC Pharmaceuticals' news release
Thanks in advance, Roger |
