Guys and Gals -
I thought we settled this REFR debate back on the REFR thread. Folks should check my posts there - I went to great lengths to try and get across the details of this deal and posted all the facts I could find about Ailouros and their lawsuits with other companies.
REFR just Federal Expressed 20 US patents to me and I am taking a look. I don't want to go into a technical discussion until I have my facts straight.
BTW, here is a clue about the floorless deals - rather than focus on whether or not the management is trying to do something nasty to the shareholders, we should be looking at 2 simple criteria:
1. Does the company make money? If not, what is the burn rate?
2. How much longer until the company runs out of cash?
3. Are there any big backers of the company (ORTC has Soros, for example) that might provide additional cash?
Roger is better at this than me, but we believe you can actually predict when a company will go this route.
The floorless deals are financing of last resort made by companies with no other access to capital.
Start by looking for money losing companies. Let's refer to this set of companies as "Losers" because they lose money. There are currently around 600+ money losing companies on NASDAQ with price > 5.
If you rule out high-profile internet, networking, teleco, and biotech companies (half of them in CA), then the remaining losers are mostly in the $5-$10 price range, around 100+ companies, about 40 of them in California. The reason I rule out the high profilers is that they have the option of doing secondary IPOs or other special deals (AMZN, ATHM, YHOO, for example). Note that I also rule out companies trading at a very low P/B or P/S due to buyout possibilities.
We are currently experiencing a credit crunch, and the possibility of a more serious credit crunch is around the corner. Losers will not have access to capital in this type of environment. Many of the 100+ companies I just mention have fallen by 50-80% in the past few months already. All of the companies with discounted floorless convertibles that are currently convertible are below $5. There are a few (less than 10) convertibles left that are not discounted and/or are not yet convertible that have yet to fall below $5.
In this credit crunch and market crash, we have seen many fewer new convertibles being issued. It's not clear if this type of financing will continue if the market does not recovers. Will we move up the food chain to companies with higher credit ratings? The equity line appears to be an alternative that is more favorable to both the company and the investor under these new circumstances. REFR, CFON, NEOT, and BIGE have equity lines.
Jon |
