Chip,
From my understanding, a company does a private placement for one or more of the following reasons:
1) they need money
2) the stock is at a high price, and there is risk that it may not stay there in the future
3) it is usually cheaper than a public offering (i.e. smaller fees to underwriter) and is more certain than a rights offering (i.e. stock price may go south before rights exercise date)
So if the company saw a risk that the Delphi deal may not occur in the near future, then they may mitigate that risk by a PP. For example, mining companies often do PPs before a drill program, because the program is risky, and if it is a dud, then they will have to issue alot more shares for the same money after the program.
If GLE management thinks that the Dephi deal is highly likely, then they shouldn't be doing a PP prior to the announcement of that deal, as this would appear to be lining the pockets of the placees, whoever they may be (i.e. often are company directors). On the otherhand, if the PP is part and parcel of the Delphi deal (e.g. Delphi is the placee) then it should be announced simultaneously.
If they do a PP before they announce a Delphi deal, then I can only assume that the Dephi deal is not in the bag, or that the likely deal may not meet the the market's expectations. GLE could use the PP as a ploy to buy more time and shop around for a better deal than Delphi is offering. In all circumstances, management is supposed to be looking out for the best long term interests of all shareholders. |
