Candle stick,
From the S4A:
Each share of New Preferred Stock may be converted at any time, in whole or in part, at the option of the holder, into a number of shares of Common Stock calculated by dividing the Liquidation Preference of the New Preferred Stock (without accrued and unpaid dividends) by a conversion price (the "Conversion Price") equal to the lower of $21.00 per share or the issue price per share of the Common Stock in the first underwritten public offering of the Company's Common Stock following the issuance of the New Preferred Stock. The Conversion Price will not be adjusted at any time for accrued and unpaid dividends, but
will be subject to adjustment for the occurrence of certain corporate events affecting the Common Stock.
The fact that the New preferred holders can convert at the same price as the secondary offering price should put a cap on the market price for quite some time. I doubt they will hold for a gain above the convert price, but will convert and sell as soon as they can to cash out the big exchange premium. Any upward movement of the stock above the convert price will be met by selling until the whole 7 million shares is sold.
The other side of the coin is that you can expect Merrill Lynch to do their part to support the stock price for quite awhile after the secondary to protect their reputation. A strong buy rating from ML can do wonders for a stock. CDRD expects $58.7 mill from the stock, so if ML gets 10%, that comes out to about $18.50 for the secondary stock. So unless I'm missing something it really looks like we can expect this stock to trade in a fairly tight range for quite some time....unless they succeed in ramping up enough small investor excitement to absorb all the stock and drive the price up....could happen, DARS has big story potential.
The Company expects that the Offerings will result in net proceeds to the Company of approximately $201.5 million, approximately $58.7 million from the Stock Offering and approximately
$142.8 million from the Notes Offering.
They say only another $100 mill after the dust settles from this go around:
The Company estimates that it will require approximately $660.1 million to develop and commence commercial operation of CD Radio by the end of 1999. Of this amount, the Company has raised approximately $266.2 million to date. After giving effect to the Offerings, the Company will have raised approximately $491.2 million of funds, leaving anticipated additional cash needs of approximately $168.9 million to fund its operations through 1999. The Company
anticipates additional cash requirements of approximately $100.0 million to fund its operations through the year 2000.
This is going to be very interesting to observe.
Good Luck,
Dave |
