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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Chisy who wrote (14810)	9/25/1999 2:35:00 AM
From: Larry Brubaker	Read Replies (2) \| Respond to of 27311

Less money, bigger discount. Today's shares were sold at a bigger discount to the market price (10%) than any of the previous shares bought by Warbucks. Also, Warbucks put up less money. Makes you wonder if Warbucks is growing more cautious. There is also the recurring coincidence that Warbucks' purchases and weakness in the stock seem to go hand in hand. Additionally, we have seen no beneficial ownership statements by Warbucks, indicating he is not holding onto his shares. The evidence in favor of a leaky floorless scenario continues to mount. Warbucks has now purchased 2.1 million shares for $11 million. Average price per share is $5.22. VLNC stock price hit $8 the day the first Warbucks purchase was announced. Since then, the stock price has fallen by 37%. It was suggested by the VLNC apologists (and Lev himself during the last CC) that VLNC is doing this "Just in Time Financing" in order to minimize dilution. By holding off the big sale until after the big price rise following the announcement of major purchase orders. Let's examine this strategy. Before VLNC raised the first financing from Warbucks, it said it needed $25 million. It has now raised $11 million in exchange for 2.1 million shares (not counting the 700,000 shares recently converted by Castle Creek). If order for the rosy "Just in Time to Minimize Dilution" scenario to be believed, one has to buy that VLNC could have raised the entire $25 million in one financing last spring or summer, when the stock was trading in a range of $6.5 to $8.5. Assuming $25 million worth of shares were sold at the lower end of that trading range, say $7 (last spring, the VLNC apologists were claiming that VLNC did not want to raise money at such a low price as $7), this would have amounted to 3,571,000 shares. Since they have already issued 2.1 million shares to raise $11 million, they would have to raise the remaining $14 million of the $25 million at $9.56 in order to suffer no additional dilution than if they had simply sold $25 million worth of shares at $7. With each new financing at low stock prices, the "Just in Time Financing to Minimize Dilution" scenario becomes more and more of a stretch. Either Lev seriously miscalculated with this strategy, or the claim that they could have raised the $25 million at once (which is a logical precondition of the "Just in Time Financing to Minimize Dilution" scenario) was a crock to begin with.