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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: sylvester80 who wrote (12891)	6/3/2002 4:56:59 PM
From: sylvester80	Read Replies (1) \| Respond to of 14638

Nortel Networks launches $800 mln equity offerings IMO, they sure picked the worse time to do this. biz.yahoo.com Monday June 3, 4:32 pm Eastern Time Reuters Company News Nortel Networks launches $800 mln equity offerings (Figures in U.S. dollars unless noted) TORONTO, June 3 (Reuters) - Nortel Networks Corp. (Toronto:NT.TO - News; NYSE:NT - News) said on Monday it had launched two concurrent offerings of equity units and 150 million common shares, which are expected to raise net proceeds of $800 million. Nortel said in a statement the proceeds "will be used by Nortel Networks for general corporate purposes, or otherwise advanced to or invested in its subsidiaries to be used for general corporate purposes." Nortel said the closings of the two offerings will be set after pricing and are not conditioned on each other. Credit Suisse First Boston, JP Morgan and Salomon Smith Barney are the joint book-running managers of the equity unit offering. Credit Suisse First Boston and RBC Capital Markets are joint book-running managers of the common share offering. ($1=$1.53 Canadian)

To: sylvester80 who wrote (12891)	6/3/2002 11:26:37 PM
From: Harry J.	Read Replies (4) \| Respond to of 14638

Dilution? The 150 million shares represent a 5% dilution of the 3,186,012,761 (give or take a few) of the common shares outstanding. At US$2.00 per share, that's a US dime. Considering the price at which I entered this atrocity, losing another dime per share is nothing. 8-) The "equity unit" thingee is interesting, however. Not sure just what that is, but it is not necessarily dilutive. Does anybody know what NT's "equity units" are? While we're waiting for an answer to that, here's somebody else's description of an "equity unit" that would not be dilutive. Seems that in some circumstances it is not considered a security under US securities laws (although it may be deferred cash compensation instead). For instance, the US National Association of Securities Dealers [NASD] issues rules, one of which is Rule 2830 which governs something or other dealing with securities brokers and dealers. In an interpretive letter dated June 18, 2001, to Mr. Philip J. Fina, Esq., of Kirkpatrick and Lockhart, [Esq. being a fancy way we US lawyers refer to ourselves sometimes just for fun, and K&L being a large law firm], I found the following passage: [Quoting NASD's response to Mr. Fina's letter in part--] "Your letter states that the Participant's contractual right to receive cash compensation upon the occurrence of a liquidation event will be denominated as an "Equity Unit." However, it will not carry with it any ownership or other interest in Management Company. In particular, it will carry no voting or dividend rights, and no rights to preferences or payments in the event Management Company's business is terminated by other than a liquidation event." [Continuing quoting from the NASD letter--] "Your letter asks that we confirm your views that the Equity Unit is neither a "security" within the prohibition of Rule 2830(l)(2) nor "non-cash compensation" subject to the restrictions of Rule 2830(l)(5). Your letter states that although denominated as an "Equity Unit," the only "right" that accompanies this unit is the contractual right to receive a deferred cash payment. No voting, dividend or other interest in Management Company is conferred by the Equity Unit. Accordingly, you do not believe the Equity Unit is a "security" for purposes of Rule 2830(l)(2). Your letter also states that the sole thing of value that is conferred is the right to a cash payment. Accordingly, you do not believe that the Equity Unit constitutes "non-cash compensation" for purposes of Rule 2830(l)(5)." The NASD letter goes on and, in part, says by way of response, " For purposes of Rule 2830, we interpret the term "security" to have the same meaning as it has under the federal securities laws. Accordingly, we recommend that you consult with the staff at the Securities and Exchange Commission for guidance on this issue. "Assuming the Equity Units are not securities under the federal securities laws, we would regard the payment of Equity Units to Participants as an award of cash compensation." For the whole letter, go to www.nasdr.com/2910/2830_05.asp What's the opinion mean? I dunno. Nevertheless, it appears an "equity unit" can allow somebody to have some sort of interest in a future cash payment in the event the obligor liquidates or is consumed by a new entity - at least in the case Mr. Fina wrote about. And I don't think the letter has anything to do with Nortel since the letter's from June 2001. Hence, Nortel's equity unit might look entirely different. For example, it might be a "convertible security" which, unlike Mr. Fina's equity unit, would be dilutive if and when converted. Ergo, if NT's "equity unit" is not a security, I'm not sure how it dilutes the outstanding common shares. But even if it is, US$850 million @ $2 per share of 3.186 BILLION shares doesn't make all that much difference, either, unless you recently bought a ton of shares at $2.20 in anticipation of the share price "recovery". 8-) Just my personal, free, rumination over here on a matter in which I have an (apparently ineluctably dwindling) interest. And even I don't rely on my own advice in matters in which I have an interest. So, you better not rely on any advice you find above, either. 8-) Regards, Harry J.