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Technology Stocks : NTN Communications, worth 185 million? -- Ignore unavailable to you. Want to Upgrade?

To: dwight vickers who wrote (1748)	12/6/1997 8:12:00 PM
From: Rich Genik	Read Replies (4) \| Respond to of 2985

Hi Dwight, Got some info on Stark and Sheppard. Both companies participated in a private placement (which was almost word-for-word the same type of deal as NTNs except the discount was 82% instead of NTNs 85%). They gave $4M to IGCA (International Gaming Corporation of America) on 15 April 1997 with 25% of the shares convertible into common starting 9 July, and 25% more at 30 day intervals after that. The 15 April price of IGCA was 5.125. The stock held up at around $5 since the offering. As of 22 October, all shares had been converted for an overall average conversion price of 3.778 (or converted while the price was at 4.61 since they received an 18% discount). Current price of the stock, however, is 2 13/16. The drop happened after Stark and Sheppard had converted their shares and seems more due to poor performance of the company in Q2 than to the financing itself. BTW, IGCA made a profit (their first) in Q3 and looks like an interesting play, now that financing isn't an issue. I would need to do more DD before a I can offer a specific rec (other than "interesting"). Sheppard (but it seems not Stark) participated in a $5M REG.S private placement to Bio Plexis (BPLX) in Jan/Feb 1997. Price at placement was around $8. The stock held steady for a while, but began to fall from what looks bleeding cash (they needed more capital, as this appears to be a developmental stage biotech). The conversion price for the Series A preferred averaged 2.58/share. The drop here I don't think is due to the financing either, as the revenues never came in. In late July, Sheppard invested an additional $5M for a unit structured security of which some is convertible into common at $2.50/share max (i.e. they are still dumping money into the company because they must see some upside potential). In early August, the price shot back up over $6 and is currently hanging around $5. This company has been raising capital at a brisk pace and the securites sales and private placements are hard to follow (common for developmental biotechs). The point is 1) Sheppard didn't abandon them after making their initial profit, and 2) the stock price now does not indicate they have been QDEKed. One could also interpret this as the initial REG.S filing dropped the price, but the subsequent issue has doubled the price. This company looks like a high risk biotech, which isn't my usual cup of tea to spend time with DD. I think that these two cases give support to Jerry's claim that these investors aren't out to destroy companies. They make investments with 20% returns in 6 months (40% per anum), which isn't so bad. You can only QDEK so many companies before no one will take money from you: their approach guarantees a high return on investment (40%), and isn't so dangerous to the companies that they dry up the market for future placements. I add that NTNs deal is better than both of these placements in both discount and the length of the deal. I feel better about the financing than I did 2 hours ago. Comments welcome. Cheers, Rich