<<Increasing the number of authorized shares does not create dilution per se. It depends on what you do with those shares. For example...>>
At the risk of belaboring a fairly basic point: Increasing the number of shares is generally a pretty good bet to be dilutive, at least in the short-term. Obviously it will be viewed in the context of the whole transaction. To the extent that it buys you immediate and future earnings, it may be seen as less dilutive or even accretive, eventually - after all, you probably wouldn't be engaging in the transaction unless you perceived that it would eventually be accretive.
Since we're talking about ASND and LU, presumably, it matters a great deal what the different prices, swap rate, earnings, and growth rates are. Perceived dilution is highly relevant to LU. At least it is to their shareholders.
Perhaps I misinterpreted your assertion that "they can always create more paper". That sounds pretty dilutive to me. It sounded like you were suggesting that if ASND holds out for, say, .85 an LU share vs, say, .70 an LU share, LU would have no problem with that, since they can always create more paper. I am simply observing that this just isn't true, unless you can justify the extra paper by convincing people that you will somehow accrue a larger revenue stream, based on the earnings and growth of the acquired company and/or the synergies. If you were trying to suggest that the increased value of a takeover from 14 billion to 15 billion might not be dilutive, since the increased dollar value might involve the same number of new LU shares, I have no problem with that.
LU has suggested that some amount of dilution might be acceptable to them. How much, is an open question. As you suggest, companies frequently accept perceived dilution in order to achieve some perceived synergies, or an enhanced market position that could potentially expand the earnings. But that does not change the fact that something might be short-term dilutive. |
