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

To: Ploni who wrote (6848)	5/18/1998 3:17:00 PM
From: CMS27	Read Replies (1) \| Respond to of 10479

>>Why couldn't they just make it convertible at ONE fixed price, say $8/share? Since no one knows what the stock's price will be on a given date, how do they make up such deals? Can anyone explain the assumptions that went into each clause?<< CSFB is loaning Osicom money for the roll out of products of which significant sales have not occured or at least have not been announced, especially with GigaMux. I can't explain all of the machinations, but they are there simply because this is a high risk loan. They can't come in and sieze the house or car as is the case with materially collaterlaized loans. Before I get attacked...I'm only addressing why CSFB has built in so much protection and not addressing wether Osicom made a good decsion or if it's in the shareholders benefit. This is simply a high risk loan without anything of a solid nature to secure the debt too so it doesn't come cheap. >>Likewise, why give the current shareholders rights, instead of shares? I see I'm not the only one complaining; many on SI and Yahoo feel the way I do.<< The Net+arm divison obvioulsy needs capital to grow. Most likely for machine tools to make the chips and other expenses which are specific to the Net+Arm product. If they had simply spun off the company, they would still have to raise capital. They could issue more shares to raise capital, issue convertible shares or a secondary offering. Whichever method they chose, your "given" shares would end up diluted in some fashion. This financing method at least gives us the opportunity to finance the company ourselves, to some extent evaluate the stock before we buy it. Once again, this is not a comment on the merit of this deal, just a comment on why. The rights offers I have read about seem to go somehting like this. For every 4 shares you have the right to buy 1 share of the new company. The asking price is limited by ratios, price to sales and price to book. Since the Net+Arm is new and there are not many sales, the price will be very low. I'm going to guess, and this is a real shot in the dark, at .25 per share. So if you own 10,000 shares of FIBR you can buy 2500 of EN at a cost of $625.00. If you decide not to buy the shares they are available for any other shareholder to buy. Scott