To: Jorjenzak (2389 )
From: Tradewinds Tech Wednesday, Jun 2 1999 1:29PM ET
Reply # of 2435
Whoaa, everybody, WAY too much angst being exhibited over this.
Baesd on 20+ years biz experience, plus much too much time spent in Biz School, I don't see anything catastrophic about the SB2 filing.
1) Selling newly-issued shares for cash doesn't necessarily "dilute" anybody. Dilute has a dirty connotation, that somehow the value of your share is lessened. If a company gives away a lot of shares too cheap, then maybe the value of your share is reduced. But if shares are sold for cash, at or above the current market price, then it is not clear that anyone got "diluted". In the long run, the value of your share depends on the revenue and profits the company generates. So it is what is done with that cash over the next year or two that is crucial, not the fact that shares were sold to generate working capital/cash.
2) People sometimes focus too much on the number of shares. If you had 1/2 % of a company, and the number of shares is doubled through a new issue, you now own 1/4% of that company. And maybe that makes you feel like you "own less". But if the company brought in cash, then the value of the company now includes that cash. So you now own half as much, of a company that is worth twice as much; so net net, it is a wash. That's a very very gross over-simplification, but it is true. Again, the key is what the company will do with the cash.
3) I thought Tom had been dropping hints for a long time, that more stock had to be issued, to raise more working capital. Haven't gone back through postings looking for this. But if you look at all the public filings (which have been out there now for a couple of months, at least?), they describe a company with very little working capital, that obviosuly had to go to the market soon to raise funds. This ain't a surprise.
4) I believe that the SEC filing establishes a minimum price. The actual selling price will be based on market demand. Don't freak over the price set in the SB2 filing. It can be higher.
5) I have been in companies that have done IPOs and Secondary offerings (this would be considered a Secondary), and I have also been associated with friends and companies that have done IPOs. Stock prices CAN and DO rise above the issue price, within a few days, weeks, or months of IPOs and secondaries. There was an assumption on several postings today, that a secondary at a given price would keep the stock price from rising for a long time. Historically, that isn't always so. Again, other than some minor day-to-day fluctuations, the long-term price performance will depend on revenue and profit performance.
Sorry for rambling.
Don't doubt Tom, stay long & strong.
Go BETT
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