John,
I rechecked the S-3/A and it turns out that the series 4 preferred
stock was issued for $100 each, not $1000 each as I had thought. So,
the correct dollar amount of outstanding preferred stock at the time
of the S-3 filing was $56,952,300, not the 108M I originally thought.
That makes extracting that much out of a 50-60M market cap look a
little better, but it is still a tremendous amount of dilution.
Based on your comments, and looking around in the S-3/A a
little more, I have a hypothesis as to what the 5% limit footnote (8)
means. In this case, I believe they are referring to past preferred
shares that have already been registered for resale after
conversion to common, and the preferred holder has not completed
conversion yet. In which case, the numbers specified would be placed
in the Shares of Common Stock Owned Prior to Offering column.
From footnote (8)
-----------------
<< Because the Selling Stockholders are subject to the 5.0% Limit,
the number of shares of Common Stock shown to be beneficially owned
by each Selling Stockholder is 5.0% of the number of outstanding
shares of Common Stock as of June 5, 1998. If the Selling
Stockholders were not subject to the 5.0% Limit, the shares of Common
Stock beneficially owned by them would be as follows: >>
Shares of
Common Stock
That Would be
Beneficially
Owned
----------------
CC Investments, LDC, 19,309,520
Southbrook International Investments, Ltd., 10,161,435
RGC International Investors, LDC, 14,781,107
Nelson Partners, 11,991,683
Olympus Securities, Ltd., 14,427,503
Combination, Inc., 8,500,000
The above numbers would replace the corresponding share
numbers in the Shares of Common Stock Owned Prior to Offering
column.
Shares of Shares of
Common Stock Common Stock
Beneficially Shares of Beneficially
Owned Prior to Common Stock Owned After
Name Offering/(1)(2)/ Being Offered Offering/(3)/
---- --------------- ------------- -------------
CC Investments, LDC 5,078,853 10,958,701 0
Southbrook International Investments, Ltd. 5,078,853 8,894,135 0
RGC International Investors, 5,078,853 12,425,515 0
Nelson Partners 5,078,853 1,565,325 0
Olympus Securities, Ltd. 5,078,853 2,568,671 0
Combination, Inc. 5,078,853 3,000,000 0
I base this hypothesis partially on the fact that the
5,078,000 shares listed for each is approximately 5% of what would
have been outstanding at the time, and partially on what Footnote 4
had to say about Series 7 preferred stock, which I assume was the
main purpose of this filing.
From footnote (4)
-----------------
<<The Selling Stockholder can convert Series 7 Preferred Stock into
Common Stock only to the extent that the number of shares issued
thereby, combined with the number of shares of Common Stock already
held by such Selling Stockholder and its affiliates, would not exceed
5.0% of the number of then outstanding shares of Common Stock, as
determined in accordance with Section 13(d) of the Exchange Act (the
"5.0% Limit").>>
What I'm not sure about is whether the Shares of Common
Stock Being Offered column includes the shares listed in the
Shares of Common Stock Owned Prior to Offering or whether they
are additive. My guess is additive.
One final point Footnote 4 also gives us a little gem that
probably explains the weakness in the stock over the last few weeks.
It also suggests that the stock price may recover some, assuming
conversion has begun, and short selling is easing.
From footnote (4)
-----------------
<<The Selling Stockholders may use the shares of Common Stock
offered hereby to cover short sales of the Common Stock if such
short sales occurred on or after the date of their purchase of the
Series 7 Preferred Stock. >> |
