To: Zeev Hed who wrote (884 ) 8/24/1999 7:55:00 PM From: mst2000 Read Replies (2) | Respond to
Zeev - I agree generally with CMON's interpretation of the "confusing" language - there is a little play from his precise interpretation because (i) the conversion pricing is derived from 5 lowest closing prices over a one month (22-trading day) period, whereas the redemption price is the number of shares which would have received on conversion multiplied by the stock price on the conversion date, which may be higher or lower than the conversion price itself (which means the redemption price may be a less than or more than the conversion price), (ii) the redemption is not all or nothing - ATG can redeem some and convert some if the $7.35 exception comes into play -- and (iii) they must elect at the beginning of each month if they intends to redeem, convert, or both (and in what percentages if both) if a conversion notice arrives that coming month when the stock price is less than $7.35 (allowing them to gauge on a monthly basis the juxtaposition between their cash position and their stomach for greater dilution, which is an appropriate time frame for such a decision because the conversion pricing itself ties in with 22-day trading periods). I agree it is rather complicated, but seemingly intended to protect the company from floorless dilution if, after 2/18/00, it deems its long term prospects more favorable than the dilution inherent in a conversion timed to its particular short term situation. For example, if the problem is a short term bear market, the company may well prefer to redeem (assuming there is money available), whereas if the stock is hurting because the company is hurting, then the company would probably allow the more dilutive conversion to go through. In any case, at the point that the conversion becomes especially dilutive, it is likely that the company is in deep trouble wholly apart from the lower price conversion and its consequent higher level of dilution, which makes the dilutive effects more of a further byproduct (than a cause) of the problem.
