Seconds and others on this board,
Below is a more in-depth look at the conversion. Due to my laziness, I haven't thoroughly gone over the new proxy agreement in reference to the Series C holders. I figured we needed the shares to survive, so I voted yes on all three proxy votes.
I cut and pasted from the S3 and 8K reports regarding the convertibles. The press release (below) that talks about a 135% of the market price conversion rate may no longer be valid. Also, I am not sure whether the 4.99% cap was lifted for the number of shares that could be converted.
Anyway, the agreement was signed on June 24, 1998. Look at the conversion dates (150 days for 25%, 181 days for 50%, 211 days for 75%, and 241 days for 100%). This means approximately Nov 24, Dec 25, Jan 25, and Feb 25.
Now to the shorts in the crowd. Read the part where the Series C holders have the right to short, hedge, put options, etc. Now read where if the conversions were to have taken place on July 23, 1998 (notification date to the SEC). GMGC would have issued the stock at a price of $11.188 and converted into approximately 2,691,729 shares of Common Stock. GMGC issued or authorized 200% of that amount to account for possible stock splits or other situations. Unfortunately, I didn't paste that below, but it is in one of the reports. Multiply 2,691,729 by two and you get 5,383,458 shares. So, the Series C holders want as many shares as possible, so they will short to get the 5,383,458 shares. If you divide the $11.188 by 2, then the Series C holders or hedge managers will want to get a conversion price of around $5.594. Has anyone else seen the price base over the last few months. Does the $5.594 price look familiar:(
Now, if you add in the warrants, I believe the total stock issue by GMGC for the Series C holders is around 5.6 million. Now, doesn't the big increase in shorts from Dec to Jan look familiar (ie a total of around 5.6 million). Another point, those individuals that went to the Special meeting of Stockholders claimed that approximately 50% of the convertibles had been converted (per GMGC management). Well, this would have been 3-5 days prior to the third 25% being converted, but also after 50% could be converted.
Another point, why would the AutoPC story add 2+ points before drifting back down and the Wirelessknowledge Deal do nothing to the price of the stock. It doesn't add up.
Anyway, the moral of the story, "is short the heck out of a company that has financed a deal such as this one." It looks as though there is a possibility that GMGC may now be close to being out of the woods with this convertible. I am very long on GMGC and don't or didn't mean to sound pessimistic.
If what I have stated is true, then I would look for more meaningful news after the 25th of this month.
Take care,
Kurt
generalmagic.com
June 25, 1998 - General Magic, Inc. (Nasdaq:GMGC) today announced that it has secured commitments for equity investments and obtained bank financing that will provide the Company with a total of $35 million in additional cash.......
The Series C stock can be converted into common stock at 135% of the market price of General Magic's common stock at the time of closing, or at a price based on the market price of the Company's stock prior to conversion, whichever is less. With limited exceptions,
the Series C preferred stock is not convertible until after a five-month period following the date of issuance.
sec.gov
Securities Purchase Agreement by and among Registrant and the Institutional Investors dated June 24, 1998.
With limited exceptions, the Series C Shares are not convertible into Common Stock until five months after the date of issuance and, subject to extension under certain circumstances, shall automatically convert into Common Stock on June 25, 2001, unless sooner converted.
The number of shares of Common Stock which may be issued upon conversion of the Series C Shares is also dependent upon the trading
price of the Common Stock at the time of conversion. If the sales price of the Common Stock decreases, the number of shares of Common Stock issuable upon conversion of the Series C Shares will increase.
Pursuant to the Series C Certificate of Designations, if the Series C Shares had been actually converted on July 23, 1998, the conversion price would have been $11.188, at which price the Series C Shares would have been converted into approximately 2,691,729 shares of Common Stock.
Pursuant to the terms of the Series C Certificate of Designations and the Warrants, the Series C Shares are convertible and the Warrants are exercisable by each of the Selling Stockholders only to the extent that the number of shares of Common Stock thereby issuable (but not including shares of Common Stock underlying unconverted shares of Series C Shares and unexercised portions of the Issued Warrants) would not exceed 4.99% of the Company's outstanding Common Stock as determined in accordance with Section 13(d) of the Exchange Act. This 4.99% restriction may be lifted or modified under certain circumstances, with at least 61 days advance notice.
(3) Assumes the sale of all shares offered hereby.
(4) Based on 28,818,653 shares of Common Stock outstanding as of April 28, 1998.
(5) Represents less than 1%.
The Selling Stockholders and any broker-dealers or agents that participate with the Selling Stockholders in sales of the Shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales.
The Shares may be sold by the Selling Stockholders by one or more of the following methods, without limitation: (a) block trades in which the broker or dealer so engaged will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction, (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this Prospectus, (c) an exchange distribution in accordance with the rules of such exchange, (d) ordinary brokerage transactions and transactions in which the broker solicits purchasers, (e) privately negotiated transactions, (f) short sales and (g) a combination of any such methods of sale. In effecting sales, brokers and dealers engaged by the Selling Stockholders may arrange for other brokers or dealers to participate....
From time to time the Selling Stockholders may engage in short sales, short sales against the box, puts and calls and other transactions in securities of the Company or derivatives thereof, and may sell and deliver the Shares in connection therewith or in settlement of securities loans.
sec.gov
(vi) "PRICING PERIOD" means, subject to adjustment as
provided in Section 2(l), the 20 consecutive trading days immediately preceding a Conversion Date.
a holder of Preferred Shares shall not be entitled to convert
an aggregate number of Preferred Shares from the Issuance Date of such Preferred Shares through the date of this determination in excess of the number of Preferred Shares which when divided by the number of Preferred Shares purchased by such holder on such Issuance Date would exceed (i) 0.00 for the period beginning on the Issuance Date and ending on and including the date which is 150 days after the Issuance Date, (ii) 0.25 for the period beginning on and including the date which is 151 days after
the Issuance Date and ending on and including the date which is 180 days after the Issuance Date, (iii) 0.50 for the period beginning on and including the date which is 181 days after the Issuance Date and ending on and including the date which is 210 days after the Issuance Date, (iv) 0.75 for the period beginning on and including the date which is 211 days after the Issuance Date and ending on and including the date which is 240 days after the Issuance Date, and (v) 1.00 for the period beginning on and including the date which is 241 days after the Issuance Date and ending on and including the Maturity Date.
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