I agree with James that we need confirmation regarding that Smith Barney watch list. Getting on even the most speculative recommended list of the 2nd largest retail broker network, though, would certainly boost AXC's profile.
Keying off that it may be useful to look at the heavyweights that already own most of the AXC preferred shares: Fidelity and Keystone.
Fidelity Capital & Income Fund = 23,995
Fidelity Spartan High Income Fund = 2,723
Fidelity Magellan Fund = 4,415
Fidelity Puritan Fund = 2,581
Fidelity Advisor High Yield Fund = 584
Trust Accounts Managed by FMR = 3,508
Total = 37,806 preferred shares X $1000/share = $37,806,000
Keystone Strategic Income Fund = 2,156
Keystone High Income Bond Fund = 24,562
Total = 26,718 preferred shares X $1000/share = $26,718,000
Because these 'back-end securities' represent the ending positions of a complicated set of debt/equity/warrants for equity (94, 95) exchanges that included an exchange of common stock priced at most at $1.00/share, I am assuming that these back-end shares represent huge capital gains on the part of Fidelity and Keystone which presumably started out with heavily discounted debt securities to begin with. The tax implications of exchanging these preferred shares for common shares MAY result in a better deal for AXC if it can execute its business plan well.
These securities are redeemable later this year on 12/97. During the last exchange (95), AXC exchanged the securities that resulted from the 94 exchange for the preferred shares now outstanding and about 11.0 million shares. AXC retained the option to convert these securities on 12/97 with stock at 90% of value provided that the stock traded above $4.00 for a specified number of trading days. Also, AXC retained the option, in the event that it does not have the cash to pay off the shares in full, to redeem shares out of a specified pool of available funds....the pay as you go provision as I call it. Bottomline: these shares are ultimately negotiable on due date.
It is fair to assume that there are Fidelity and Keystone analysts out there keeping track of the company. In Fidelity's case, they have been unloading the common shares they got in 94 and 95 thus accounting for the 0 common share position (see public Edgar). I attribute that selling (first halves of 94 and 95) to Fidelity's move away from the distressed securities type of investing that led to the initial position in Ampex in the first place. If you recall, one of the first things that Ned Johnson, owner of FMR, did in his housecleaning was to relieve the three co-managers of Fidelity Capital & Income which was the high command for that kind of distressed investing then. I am not too familiar with Keystone.
At some point leading up to the 12/97 redemption date, though, the Fidelity and Keystone analysts will probably see the progress that AXC is making in...
1) increasing the growth of the DST-based core business,
2) growing the totally new KM/TFI/MR revenue stream with an initial low risk strategy of licensing then reselling then manufacturing, and
3) commercializing the other products in the R&D pipeline, thus creating even more totally new revenue streams. For example, it is safe to assume that it is easier for AXC, because of its tape-based business, to commercialize Keepered flexible media than it is for AXC to commercialize keepered disk media in a disk drive industry in which it no longer participates.
Also, because AXC has strived to increase the level of common components shared by its tape-based products, it is easy to for AXC to enter new markets for its storage products. For example, Storagetek and the DOD have this telemedicine trial going on that involves the storage and transmission over broadband networks of terabyte-gobbling radiology and mammography images. AXC's tape libaries are definitely viable here if and when the market moves beyond the trial stage.
You add those dynamics in place to the tax advantages of exchanging preferred shares for common shares (am I correct in assuming that there are tax advantages?) and you get the sense that AXC is actually in a good position to make an advantageous deal later this year. We get the added exposure to boot if either of these two add to their positions based on the fundamentals alone. A fair bet, at least.
It takes time, though, to make all the cylinders click into place, but when it does....well, the numbers are starting to shape up. |
