Firstly I think you'll find that just over 2 million shares are freed up in January. Hardly a massive dilution even if they did all enter the market at once. A further 2.4 million (approx.) are locked in for another year.
In addition to any shares coming from previously locked up holdings, one also will likely have a ton of shares arising from exercise of the warrants. Here are the relevant terms of the warrants:
Each Warrant entitles the holder to purchase one share of Common Stock at a price of $6.25 per share during the five-year period commencing on January 15, 1998. The Warrants are redeemable by the Company for $.05 per Warrant on not less than 30 nor more than 60 days written notice if the closing price for the Common Stock for seven trading days during a 10 consecutive trading day period ending not more than 15 days prior to the date that the notice of redemption is mailed equals or exceeds $10.00 per share, subject to adjustment under certain circumstances and provided there is then a current effective registration statement under the Securities Act of 1933, as amended, with respect to the issuance and sale of Common Stock upon the exercise of the Warrants. Any redemption of the Warrants during the one-year period commencing on January 13, 1998 will require the written consent of First London Securities Corporation.
sec.gov
The last four trading days have seen closing prices above $10:
Date Close High Low Open Volume
12/31/98 12.250 13.000 10.125 12.000 381,500
12/30/98 12.375 13.875 10.000 11.750 846,100
12/29/98 13.063 16.500 11.188 16.000 1,449,100
12/28/98 16.125 16.625 9.625 9.875 3,605,600
If the closing price of IFLY exceeds $10 on three of the next six trading days, then it is a safe bet the company will proceed with what essentially amounts to a forced exercise of the warrants by the holders.
How many warrants are outstanding?:
As of March 25, 1998, the Company had outstanding and entitled to vote 7,508,427 shares of Common Stock, par value $.01 per share ("Common Stock"), and 3,380,000 Redeemable Common Stock Purchase Warrants ("Warrants"). In addition, the representative of the underwriters of the Company's initial public offering held warrants to purchase 135,000 shares of Common Stock and 270,000 Warrants, and the Company had issued a warrant to purchase 100,000 shares exercisable at $6.00 per share and an aggregate of 687,500 options, exercisable at various prices, to its officers and directors. (source: 1998 10-K)
Based on these figures as of March 25, 1998 there were 3,785,000 shares which would be added to the float on any forced exercise (the 405,000 shares resulting from the underwriter's warrants and warrant warrants plus the other 3,380,000 warrants.) To this number, one needs to subtract any warrants subsequently exercised in 1998 and add any warrants (with terms similar to the IPO warrants) which have been subsequently issued.
Of course, it's certainly possible IFLY might tank on Monday (or by Wednesday at the latest) in which case the above may be moot. |
