Fang Li,
<Kerry, Would the stock be priced at $10 instead of $2, if this news come 3 months earlier? >>
I been thinking about this issue, too. We are all glad that Ancor landed this funding. It probably doesn't make much difference to the company whether it was closed in July or September (maybe it was closed earlier and not announced until last week?), but it does make a lot of difference to the common stock holders.
The potential dilution from conversion of preferred stock is several to many millions of shares greater because the stock wallowed in the $1 range for a couple months. Even if the stock continues its nice rise of Friday, we will be feeling the effects of excessive dilution for most of October (and possibly longer). This flood on the supply side will damp the benefit of a heavy demand caused by a major OEM announcement.
Had the good news of 9/24/98 come on 6/24/98, or even 7/24/98, I think we would have had a bigger dollar rise the next trading day than we did last Friday. There was no way to characterize the news as bad in any way, yet less than $1 rise on huge volume. As George pointed out, we had one of our biggest trading days ever. We need to have millions of shares sopped up before we enter steady state market conditions.
I don't know if the preferred shareholders can drive the price back below $1.50 again, however it does seem likely that they would try to drive prices down (by selling or short selling) for a few days before a planned Series C conversion date. It would be interesting to know if they set conversion dates in advance, or only respond to current market conditions.
I hope Ancor will have no further need for a convertible preferred offering, and am glad they pursued this non-dilutive form of financing. I'd rather quibble about when this financing was secured than hear of another convertible offering.
Greg |
