Ed,
<<For instance I would question whether the series B and C holders have the same objectives or that they even know each other. For instance the Saudi Prince went his own way right out of the box>>
Ignoring some minor (4 or 5 share) holders, there were 4 Series C shareholders. Three of the four shareholder (and the minor shareholders) were affiliated with each other and referred to as the "Citadel Entities". The Tail Wind fund was the only group not part of the Citadel Entities.
The Citadel Entities and the Tail Wind fund also invested in the Series B offering. In addition to these two, Capital Ventures also held Series B shares.
We have heard reports in the recent past of 3 holders of preferred stock. I believe Kerry reported that one or two of them had problems with the rest of their portfolio and were selling Ancor stock to raise cash. At least one of them was rumored to be interested in holding for the long term. I believe these are the three groups named above.
If the Series B offering is fully converted, we would be down to the Tail Wind fund and the Citadel Entities as players today. They would have no more B shares and only C shares. This might affect their strategy of how to unwind.
I would like to see written confirmation of the 15% monthly conversion limitation, but assuming that there is such a limitation, Tail Wind can convert no more than 37.5 preferred shares per month, and the Citadel Entities can convert no more than 127.5 shares per month. Further they are restricted to holding no more than 5% and 15%, respectively, of the outstanding common stock.
At current conversion prices, the 15% limitation means that no more than 1.7M common shares can be introduced each month. This assumes that there is no backlog from previous months. According to Kerry, the 15%/mo would accrue from June. If they did not convert a full 15% each month since June, they would be able to convert more this month.
As of 8/26/98, Tail Wind had converted 77 shares, or two months' worth at the maximum rate. If they continued this trend, they would be done converting by January, 1999.
Only one of the Citadel Entities had converted any shares as of 8/26/98. (This group owns 50% of the Citadel holdings, however.) A total of 43 shares had been converted by this group, even though 127.5 shares could have been. As a group, they could have quite a bit of share dumping power available.
I hope we get an update of the current holding of preferred shares by the Citadel Entities at the conference call. We certainly could use a few more data points for our extrapolations.
Greg |
