TO ALL: I'm long on LUNN, but having read the prospectus, I find some items disturbing. For those who do not want to read the entire booklet, at least read pages 8, 9, and the table on page 20.
The table examines two cases, one where TPG meets certain performance requirements (the Maximum Shares Issued case) and one where TPG completely misses the requirements (the Minimum Shares Issued case). Let's examine the first case (the second is similar, but not as extreme):
Based on year end data December 31, 1996, had the merger taken effect and had all other things remained equal, the Lunn historical net income per share would have increased from $0.06/share (historical) to $0.09/share (Equivalent Pro Forma). That's the good news. Now the bad news: The LUNN book value per share would drop from $0.92/share (historical) to $0.41/share (Equivalent Pro Forma). Where did it go? To the former TPG shareholders.
It gets worse: For the 6 months ended July 4, 1997, both the net income per share and the book value per share for LUNN shareholders would drop (from $0.05 to $0.02, and $0.89 to $0.43).
Page 24 confirms the immediate dilution: "As a result of the Merger, holders of Lunn Common Stock will experience an immediate dilution in their aggregate percentage ownership of the Combined Company as well as in the book value of their investment."
Conclusion: It appears to me that strictly from a numerical conversion, this merger decreases the value of our investment. So we must count on other mechanisms to cause the price to increase, such as listing ATPX on NASDAQ and the synergy generated from merging two complementary companies. Also, it should be noted that the above analysis is backward-looking. And, I'm not an accountant so it's possible I have misinterpreted the data.
I'd appreciate hearing confirmation (or refutation) of the above analysis, and also time frames and positive factors that may affect the price. I'm trying to decide whether to bail now, or hold for the long term. But will it go up in the long term?
- Fred |
