Grant- You've brought up a good point and one that I'm sure may have been part of the slide. I've seen what your are referring to happen to Cityscape Financial, who had a ton of this stuff on their balance sheets and came back to haunt them.
The Series C, if I recall correctly, was converted around the $2.50 level during the qtr just ended, which will add about 850,000 shares to the total outstanding. A small amount of the series E's are still out there with a minimum conversion price of $4, resulting a potential maximum of 150,000 shares to be issued. The series A still have to be converted, but at minimum of $67.50, resulting in 37k shares to be issued at that price. I beleive the ones that you are concerned about are the B's and the D's, where one is currently under some sort escrow agreement, and the other has some sort of window provision where it won't become convertible for quite a while (I believe next year if I recall correctly).
The past conversions which have ramped up the shares outstanding dramatically over the last 1 1/2 years, have been continuing source of confusion, iritation, and frustration. The company used preferred convertables as a source of funds to finance past acquisitions, with the intent of them getting converted at higher strike prices, hence causing much less dilution. However, the growth in the networking sector fell short of expectations last year, as witnessed by just about everyone except CSCO giving out earnings warnings and their 3 key products took longer than expected to roll out. On top of that you had Barrons out there to pound the company's stock price into the ground even more, causing the share count to blossom with the conversion of a few of the various flavors of preferreds.
Now the 3 key products that are expected to generate the growth for the company are finally starting to hit the market. Significant resulting revenues (greater than 10% of total revenues) should start to happen in Q1 or Q2. Meanwhile there are less than half of the convertible preferreds outstanding than there were at the beginning of 1997 from my calculations... so most of the damage has been done already as it relates to share dilution
Hope that helps explain your question. |
