Timelord, friend.
What I have done in the meantime - a tidbit on dilutive financing and its outcome:
"Enamelon (Nasdaq: ENML), a valley of tears. And a textbook style dilutive financing.
Enamelon has never been a company with sound fundamentals, when it was clear that the introduction of their main product, a mineralizing toothpaste, would either take longer than originally planned, or the costs incurred with the placement would exceed estimates. So did losses as well as negative cash flows. Not surprisingly the stock was soon circled by short sellers who figured that the stock was grossly overvalued.
But from the depressed levels of early October, when Enamelon traded as low as $3 1/4 (Sept 10 1999), the stock has somewhat recovered.
Amongst short sellers, money losing ENML was considered a edgy short then.
The devil advocates listed the high short interest and day-to cover ratio, amongst with some rumoured involuntary buy-ins, and some fire buys of short portfolios, ENML stock amongst them, sent the stock up to a high of over $10 late December.
Finally, ENML has been relatively cash-rich and had a real product, in the very contrast to other short sellers favourites. Few longs were speculating if it the turnaround, as implied by the stock price, was for real.
Alas, the fundamentals of ENML deteriorated quickly. With quarterly cash losses north of $5 MM (most recently $8 MM), it was a matter of time when it had to do another round of financing. In December, when the stock was richly valued, they did a comparably small round of $5M, according to an 8-K filed Dec 21 1999.
At the time, it represented less than 5% of the market capital.
Until January, the stock price slightly suffered but it traded still above $8.
Commencing with the initial registration of common shares to be resold, the stock suffered, as the liquidity of the stock was simply not high enough to cover all the shares hitting the market. Short sellers which had to be patient quite a time realized the dilutive potential of the new equity financing and didn't think about covering, as the short interest actually increased in the coming months.
With every round of heavy selling and a significant decrease of the stock price, Enamelon had to file another S-3 Amendment covering the resale of additional shares. Till now, 3 such amendments have been filed, raising the amount of shares to be resold to 4,553,000 shares in total, when the initial registration has covered only 1,777,768 shares, which represented 200% of the shares to be created by conversion, initially (888 K shares).
In April, the desperate company was forced to seek shareholder approval for the registration due, as the number of shares created by conversion would have exceeded 20% of the total outstanding shares thanks to the deflated stock price.
As the share price has decreased again since the last registration from early June and stands at 1 1/16, the next registration if any, would cover additional 4.95 MM shares (200% of the total consideration - as the company is obliged to register such an amount per a contract clause) for a total of 9.9 MM shares, or almost 100% of the outstanding shares before that round of financing.
Recently, the company announced cuts in their spending for marketing as well as workforce. Of the 50 employees, 20 had to leave. So the already heavily dilutive financing not only separated shareholders and their investment in common shares, but also, as the company is perhaps aware of the fact that they can not get orderly financing (recently they warned that the stock may not be in compliance with nasdaq listing) - finally caused a reduction of employees.
As said, a valley of tears. Buyer, beware ..."
biz.yahoo.com
Company fundamentals:
Revenues, mrq: 5.8M
Total op. expenses: 11.7M
Net loss: 8.1M
Cash losses: 8.1 MM
Cash at end of period: $5 MM (Mar-31-1999)
Shares out: 10.289MM as of May-3-1999 |
