Mark,
Good explanation, but I think you've made an error about the $.025. It is not a conversion fee. The following is extracted from Microvision's form SB-2/A filed on November 23, 1996:
"The Company may redeem the outstanding Warrants, in whole or in part, at any time upon at least 30 days prior written notice to the registered holders thereof, at a price of $0.25 per Warrant, provided that the closing bid price of the Common Stock has been at least 200% of the exercise price of the Warrants for each of the 20 consecutive trading days immediately preceding the date of the notice of redemption."
So, what does this mean? Literally, it means that the company can buy the warrants back from the holder for $0.25 once the stock trades at $24.00 (200% of the exercise price) or above for 20 days. Practically, it means the company can force the warrant holders to exercise the option at that point in time, since no one would want to sell their warrants back to the company for $0.25.
Now, why is the company doing this? The reason they included the warrants in the offering in the first place was to provide them with secondary financing down the road. When the warrant holders have bought their stock, Microvision will have an additional $27 million ($12.00 X 2.25 million warrants) to work with.
The fact that these warrants serve as a secondary financing vehicle is the reason the company needs to be able to force their conversion. Otherwise, the owners could sit on them until August of 2001, far beyond the time when Microvision would need the cash infusion.
I hope this clarifies things.
Stephan |
