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Technology Stocks : Orbital science (ORB)
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To: Gerald Walls who wrote (1369)3/29/1998 8:39:00 PM
From: contax  Read Replies (1) of 2394
 
>>There will be some discount. If not then why not just buy the shares on the open market and not fool around with the extra crap required to subscribe to the SPO.<<

The reason(s) a company does a Secondary (other than the obvious need for cash) are, imho:

1) The company has a positive outlook on the future business prospects and

2) Believes that there is enough demand in the market for additional shares and an increase in the float will help attract new institutional ownership.

Now as to your point of why the buyers of the Secondary don't just buy the shares from the open market: If they did so a simple case of supply and demand would take hold and it would end up costing them a heck of a lot more because buying 2.75 million shares (as in ORBI's case) from the open market will put a lot of pressure on the share price. Therefore in a Secondary, the Investment Bankers also act like traffic cops if you will and they help an orderly absorption of the extra shares without letting the price get out of hand; and once the distribution of the Secondary is complete, they along with their cohorts, the Market Makers, raise up the share price and then give the new buyers a chance to take profits if they so desire.

That has been my experience in the past watching numerous Secondaries. Of course we will soon find out how ORBI's Secondary plays out!

BTW, this will be my last post on this subject as I feel I have taken enough time of this thread.

Karim
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