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Technology Stocks : komag
KMAG 0.00010000.0%Mar 7 3:00 PM EST
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To: scott blomquist who wrote ()7/1/1998 8:40:00 PM
From: Robert H  Read Replies (2) of 848
 
Has any one seen Komag's recent call for a stockholders meeting to vote on a large increase to the authorized number of shares of common stock of the company and placement of the shares in private sales? I'm interested in what this might mean to the price of the existing shares and how current shareholders would potentially be affected or might be treated by the company.

On the surface of it, you would think the number of outstanding shares double, eps, sales per share, get cut in half. Book value may stay the same as cash goes into the balance sheet at the market price at the time of sale. So, the net effect is more shares and more cash,the company uses the cash to try to work out of the current problem. If they succeed, the oompany stays in business but the potential upside for the shareholders is limited because earnings are distributed over a much higher number of shares. If they fail, well, who knows.

Is anyone truly familiar with the mechanics of these type of arrangements particularly from an accounting and finance point of view? What might the current shareholders expect to reasonably happen? I would appreciate an answer from someone who has seen this sort of thing in the past, particularly if you work in the securities industry or have a lot of experience in accounting or finance in situations like this one.

Within a week of the announced stockholders meeting to vote on this issue on July 22nd, the stock started climbing slowly, not what I would have expected given the implications of the announcement.

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