Novell (NOVL) dirt cheap, good buy? Message Board

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Technology Stocks : Novell (NOVL) dirt cheap, good buy?

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To: Roger Lagerquist who wrote (22482)	6/5/1998 7:19:00 PM
From: Paul Fiondella	Read Replies (1) of 42771

Take a look at this Roger "G. PUT WARRANTS During fiscal 1996, the Company sold put warrants on 9 million shares of its common stock for $12 million, callable on specific dates in the third and fourth quarters of fiscal 1996 and the first and second quarters of fiscal 1997, giving a third party the right to sell shares of Novell common stock to the Company at contractually specified prices. (Note: $1.33 a put) During fiscal 1996, the Company settled put warrant obligations on 5 million shares for cash of $6 million. (Note: $1.20 a put) The put warrant liability is the amount the Company would be obligated to pay if all the outstanding put warrants were exercised at the strike price without a cash settlement. The proceeds from the issuance of the put options were accounted for as additional paid-in capital. The company expects to settle the put warrant obligations with cash and thereby eliminate the liability. As of fiscal year end, the cash settlement would be approximately $12 million." (note: $3.00 a put) ============================= Total loss to the company of $6 million or 50% of the initial value of the puts. These puts were being cashed out because the loss would have been greater if they were exercised as in the Put was for $15 and the stock was trading at $10. I assume the company would not be obligated to report exercised puts as anything other than stock buybacks. Thus by using puts, the company could very well contract with "third parties" to buy back shares at above market prices and the fact that they bought back some of these puts rather than let them be exercised leads me to beleive that happened. Rumors of the "third parties" were thoroughly discussed at the time on this thread. I leave the new culprits to your imagination.

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