Sam,
I can't agree with the logic of "Empire". The whole point of doing it for a ratio of shares like Del did is that the shares are effectively one and the same (give or take the uncertainty premium) from the moment of the announcement; both shareholders share the pain and the gain of share price movements in BORL from then on.
Remember what happened with OPEN? That was more like a fixed price deal - when BORL's price went down; BORL shareholders lost big time because the price of the deal didn't change. When BORL's price went down, OPEN shareholders just became entitled to a better conversion ratio; forcing more dilution and more downward pressure on BORL which turned into a vicious spiral.
This way, if BORL falls, VSGN feels it too because the $150m buy price falls; if BORL rises VSGN feels it too. The shareholders are in the same boat. OPEN shareholders on the other hand were long puts on BORL as well.
I have one other comment that might be worth thinking about. I was struck by how this buyout price was exactly $150m. It sounds like a nice round number that was decided as the price well before the announcement. Well, since BORL spiked to $12 just bvefore the announcement, the conversion ratio for Del to get VSGN for $150m was LOWER (i.e. more beneficial to BORL shareholders) because they used the closing price of $12 and not say $11. If BORL had closed at $11, the conversion ratio would have been .89441 and not .81988. As supporting evidence that my above theory is correct, consider
a) the price was a nice round $150m
b) who would dream up a conversion ratio of 0.81988? If it was just "let's give them a conversion ratio", you'd go for 75%, 80% or possibly 82%, but no way 81.988%!!!
I submit that $150m was the price no matter what, and Del took good advantage of the BORL share price spike to get a better conversion ratio for BORL shareholders. Give Del some credit.
It's a different spin on the same event, with some strong circumstantial evidence IMHO. What do others think?
Neil. |
