All those costs are covered when they sell the 65,500 shares they repurchased under $6 to Ailouros for $8.25
Dixson -
I am currently enrolled at MIT and taking the Futures and Options class from professor Cox, author of the book "Options Markets".
I am of the opinion that Ailouros has the option (the B warrants) to buy stock from REFR at 8.25, not the other way around. They would not be rational to execute this option if the price is below $8.25. If the price goes above $8.25, the option will be "in the money", and will be valuable to Ailouros. This option is currently out of the money and could be priced, according to the Black-Scholes options pricing model, based on the expected future volatility of REFR. I haven't done the math, but it will have a small positive value for Ailouros, maybe $1/share or there about.
One thing I've learned about the options market is that it's a zero-sum gain. If the options has a small positive value for Ailouros, then it has a small negative value for REFR. Writing this option was part of the transaction cost to REFR in doing the deal with Ailouros. Not really a big deal one way or the other, especially when compared to whether or not REFR can succeed with the next generation of product.
We can also value any stock REFR bought-back at $6. The price is now near $7, so far they have gained about $1/share for every share bought back. If they bought 65K shares (can you refer me to any filing or news about this please), then they would have gained $65K, or nearly .8% of their current market cap. Not a big deal unless you compare this to last years revenue. But I would hope the company is not more concerned with making a market in their own stock than running the business. Typically, companies buyback stock when they need to distribute excess cash, not to flip there own stock to a convertible investor.
By the same token, the filing fees Barbara mentioned aren't signficant for a company this size, I think her point was that they made the SEC filing for a reason. It's a written disclosure to all investors of what business they have transacted with Ailouros, that is all.
Personally, it seems to me that rather than buying back shares, REFR would be better off increasing their technical staff of 6 to be able to ramp up for the new business that is just around the corner. Maybe some licensee relations / application support types might be needed for the coming ramp up in the next few days. But then I'm not the CEO of REFR, so let them decide how to invest their cash and we can decided which stocks to buy.
But please stop posting misleading information. I liked it better when you we were getting back to the fact of the company. You don't have to answer B. Payne if you don't want to.
So let me try to get us in that direction. I was checking out their website and didn't find out alot about their technical staff. Have you met any of the engineers? What are they like? Has anyone driven by corporate headquarters to see if employees were burning the midnight oil to get the product out on time and stuff like that? What is the corporate culture like? Do they plan to expand staff in the near future, or just focus on the licensing deals?
Again, good luck with your position, this is just my opinion as to the facts of the deal and not an assessment of the value of this company.
Jon |
