My take on the 8K:
Yup, it's pretty low-risk for the investors (three companies, two of which are off-shore). If the stock price drops, they are given a bunch of shares for free to make up the difference (and then some). Basically, they make a combined $250K at the time of the first reset no matter how much the stock has dropped (which equates to about 12.5% return on the initial investment). Of course, in the unlikely event the stock rises, they make profit from the shares they hold. So if the stock goes down, they get a ton of shares and make money; if the stock rises, they don't get any more shares but they still make money.
The initial dilution to shareholders, i.e. those poor longs, is a mere 11%, but the resets could easily increase that to over 20% should the stock continue to drop.
The investors had to sign something saying they promised to not short the stock (evidently it is in their best interest to see the stock price drop, at least in the short-term).
And just in case the above was not a cushy-enough deal, there are a bunch of free warrents tossed in; initially, at the laughable price of $22 or so, but then should the investors invest more than the initial $4M, the warrents are at a more realistic 125% of current price. I forget how many warrents they get, but it's yet more shareholder dilution...
-- Pete |
