Doug, IVIP isn't at risk of going bankrupt soon. You've overlooked the private placement.
Excerpts from S-1/a:
<Private Placement. On April 10, 1998, the Company raised $5,000,000, less expenses, through the sale to the Selling Shareholders of 5,000 shares of Preferred Stock and the issuance of the Warrants.
The Company believes that its cash and cash equivalents, in addition to $5,000,000 which the Company obtained in early April through a private equity placement to certain institutional investors, will be sufficient to fund its operations through December 31, 1998. >
Here's how this worked:
The co. had a terrible balance sheet and it burns cash, so it needed to raise cash. To do this, it sold convertible preferred stock to Advantage Fund II Ltd and Koch Industries, Inc., raising $5 M for the co. The co. then filed the registration so that Advantage and Koch can sell common stock on the open market after they convert their preferred. That's why Advantage and Koch are called 'the selling shareholders. The co. receives no money from the sale of the common stock because it already received its money by selling the preferred stock to the 'selling shareholders'.
Deals like this are fairly common for cash-burning companies with a market cap under $150 M that are unable to receive funding otherwise. Convertibles of this type convert into common at a price that varies with the price of the common stock.
You can learn more about this from the web page for the 'SEC Search Club', where members take turns finding these deals and analyzing them, for the purpose of providing info to club members who might want to short them. As Drakes mentioned earlier, I found IVIP early last week, and sent email reports on it to our club members. Until a decent amount of time has passed, we generally don't post our correspondence on boards, but rather keep it to ourselves, via email.
Our club's web page can be found at:
dusty.physics.uiowa.edu
and details about the how the convertibles work are found at dusty.physics.uiowa.edu |
