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Technology Stocks : Osicom(FIBR) -- Ignore unavailable to you. Want to Upgrade?

To: Mama Bear who wrote (6790)	5/15/1998 6:15:00 PM
From: David Pawlak	Read Replies (1) \| Respond to of 10479

The number of holders is one of the questions I have as well. I'm not certain if the 4.99% clause refers to the class as a whole if it pertains to the individual holders yet, but I'll find out. Your concern about converting and selling, then converting the rest is an interesting one that I'll also find out about. Still reading...

To: Mama Bear who wrote (6790)	5/18/1998 12:40:00 AM
From: David Pawlak	Read Replies (1) \| Respond to of 10479

I did a little more research on the issuance. There are a total of 2 investors in this preferred issuance. Therefore, each investor has the right to convert their preferred shares into a total of 4.99% of the common outstanding stock, which can happen no sooner than 90 days subsequent to this issuance (8/14/98) or the date on which the Rights Agreement has been declared effective by the SEC (which is in Osicom's best interest to put off as long as possible). Therefore, if there were 22 million shares outstanding at the time of conversion, the max new shares that would be issued would be 2.1956 million shares. To follow up on Barb's valid concern (conversion, dumping, and then converting into more, etc.), it appears to be highly unlikely. The reason is because of the intensive due diligence that CSFB performed as well as the sensative information they required prior to consideration that resulted in them becoming in effect insiders of the company who are now privy to considerable "inside information". CSFB required, prior to their agreement and subsequent cash infusion, the names of all the GigaMux evaluators as well as key contacts, existing customers, suppliers, internal projections and forecasts, budgets, lending banks, creditors, etc (basically any juicy bit of information that I would love to have my hands on). They have been checking up on these relationships over the last month now, allowing them to get comfortable with the potential investment. With the above information being "inside information", they could be considered violating insider trading laws should it be proven that they sold as a result of, say for example an internal forecast being missed or a significant GigaMux evaluator going with Ciena product. It's a really gray area, and one I don't expect CSFB with their pristine reputation to go anywhere near. So, it looks like they will likely be holders for a while once they decide to convert. Here are some key aspects: -No interest/dividend payments, unlike some of the prior deals of the past. -Up until now, there has been no large institutional holders. With First Boston being the first to step to the plate after significant due diligence, others are likely to follow in my opinion. At this stage of the game, the shares are priced at a real value based on the technology they possess, though the stock has been bypassed because of lack of institutional ownership and the Barrons and Business Week negative articles. Now that a well respected Wall St Firm is involved, I would bet they will be getting a closer look from other firms. -They are locked out of converting these shares for 90 days (unless the registration goes through first) so it is in Osicom's best interest to get the stock price up so that the shares convert into something less than 2.2 million. I would like to think that this financing has been timed so that significant events can now begin to roll out and make this offering advantageous to the company (meaning that share price goes up as a result and conversion occurs at a much higher level as a result). The company could have gotten by with the credit line they have access to but it appears they will need the cash to possibly ramp up production. (I am inferring this based on Gorman's comment in the release on 5/14/98 and the fact that 3 GigaMux evaluators are in the last phase of evaluation, which would require this type of cash). Should the conversion go through at higher levels, it will have the effect of a secondary offering at a premium. These types of financings in the past have been utilized to fund aquisitions, so it is interesting to see one to fund product ramp up. This could be a very bullish statement if I'm reading into it correctly. I guess we will see in the weeks ahead. - There is a floor of 4.99% ownership for each holder of the new security (2.2 million new shares). Should a "worst case scenario" like Barb suggested evolve (conversion, sell, conversion, sell, etc.), the resulting dilution is limited to a 19.99% "maximum cap" (a secondary floor) on the amount of possible new shares to dilute the common. So, this offering is by no means a "floorless" issuance. While I feel this scenario (19.99%) is highly unlikely, it is a scenario that should be entertained. -I also like the optional redemption plan that allows Osicom to buy back the issuance at 116.28% if the price of the common trades less than $3.50 for any 10 consecutive days. This should prevent the stock from being arbitraged in my opinion. I know the shorts (and logical thinking) will say that if it goes south of $3.50, they won't have the cash to buy it back. I will counter that by saying not to underestimate the GigaMux and the NET+ARM chip, which could both be easily licensed or spun off for potentially millions, thereby supplying the necessary cash to buy back the issuance. If this deal were up for shareholder vote, I would have voted yes. It brings in a ton of credibility and the awareness of other institutions with the fact that CSFB did a ton of due diligence on the company prior to its cash infusion. In addition, now that CSFB has done their thorough research, it is much easier to complete other deals together in the future, as the hard part (due diligence) is behind them.