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Technology Stocks : SYQUEST -- Ignore unavailable to you. Want to Upgrade?

To: JustMy2Cents who wrote (6738)	6/22/1998 3:37:00 PM
From: Troy Shaw	Respond to of 7685

JustMy2Cents, So what you're saying is that I should follow this dog a little closer? Maybe. I stand by my statement that any signs of strength in the stock will meet serious selling pressure. If Syquest shows positive GROSS margins any time this year, I'll be impressed. Very impressed. I don't think it will ever happen with their current product lines, but if it does.... Well, I've been wrong before. Also, where does Syquest's future (ie. next quarters) financing come from? Warrant conversions? Not unless Syquest entices it, by offering discounts from the current price. Or, is that what they just did.... (More dilution.) Could you please explain their business model to me? <<44.7 million shares will not hit the street as per your interpretation of the S-3 filed on 6/11/98. If you look at the S-3/A filed 2/25/98. 45.8 mn shares were offered. Compare the two and you will see the beneficiary owners prior to conversion are mainly the same. In other words, most of the investors in Syquest have not sold in the past, and in my opinion the will not sell now. The latest S-3 is basically lowering the price for which the beneficiary owners may "buy" the shares at. It was $2.61/share in the 2/25/98 S-3/A and it is now $1.4375 due mainly to the fall in the common shares in the marketplace.>>

To: JustMy2Cents who wrote (6738)	6/22/1998 8:32:00 PM
From: Troy Shaw	Respond to of 7685

JustMy2Cents, This is an interesting statement: <<The latest S-3 is basically lowering the price for which the beneficiary owners may "buy" the shares at. It was $2.61/share in the 2/25/98 S-3/A and it is now $1.4375 due mainly to the fall in the common shares in the marketplace.>> Why would Syquest have to issue another S3, to adjust the price? After all, the $2.61 was a "proposed maximum offering price." That implies that the offering price can be lower. As pointed out in this phrase from the filing: <<The exact number of shares of Common Stock issuable on conversion of the Series 3, Series 4, Series 5 and Series 7 preferred stock (collectively, the "Preferred Stock") cannot be estimated with certainty because, generally, such issuances of Common Stock will vary inversely with the market price of the Common Stock at the time of such conversion, and there is no maximum limit on the number of shares of Common Stock that may be issuable. >> I suppose the SEC may require it.... Conversion difficulties? <<The Company has been notified by Nasdaq that, in its view, stockholder approval would be necessary for the Company to issue shares of Common Stock equal to 20% or more of its outstanding Common Stock in connection with the exercise of the Series 7 Preferred Stock.>> Any chance of hitting that limit? <<It is likely that the Company would be required to exceed the 20% Limitation for both the Series 5 and Series 7 Preferred Stock if the holders thereof desire to convert those shares to Common Stock and exercise their respective warrants for Common Stock. In connection with the conversion of the Series 4 Preferred Stock and the exercise of related warrants, the Company has already been called on to issue a number of shares of Common Stock that would be equal to or greater than 20% of its outstanding Common Stock.>> Penalties for conversion difficulties? <<The terms under which the Series 4, 5 and 7 Preferred Stock were issued include penalties if the holders of such stock are unable to convert their Preferred Stock into, or exercise their related warrants for, Common Stock because the 20% Limitation prevents the Company from issuing a sufficient number of shares of Common Stock. For the Series 4 and 5 Preferred Stock, the penalty requires that the Company issue warrants for a significant number of shares of Common Stock on an ongoing basis during the entire period that the 20% Limitation prevents the Company from issuing Common Stock in response to a notice of conversion. For the Series 7 Preferred Stock, the penalty requires that the Company redeem the Series 7 Preferred Stock at 120% of its $1,000 per share stated value (the "Redemption Price")>> What does all that mean? Conversion of series 4 stock required greater than 20% dilution, but apparently Syquest wasn't operating under a 20% dilution restriction. (Series 4 started with 280,000 preferred shares, of which only 57,000 shares remain unconverted.) I guess that may have been why Nasdaq "notified" the company. If that is the case, then the good news is that Syquest successfully completed a significant amount of dilution already, giving them more shares to compare dilution against. That way they can more easily avoid the 20% dilution limit imposed by Nasdaq. Anyway, I think it is fascinating. Now to find companies in similar situations....