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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: Dave K who wrote (136)	10/11/1998 10:14:00 PM
From: Jonathan Babb	Read Replies (1) \| Respond to of 1438

Wanted to confirm why you included "biotech" in your statement..."If you rule out high-profile internet, networking, teleco, and biotech companies". Is this because their value is already devastated ?. Because these high-profile companies most likely have access to cash via traditional means, like a secondary IPO, or an investment from SoftBank. >> The equity line appears to be an alternative that is more favorable >> to both the company and the investor under these new circumstances. > >Why favorable ? The investor does not have to come up with any cash up front. In fact, they are typically paid a fee. If you don't count the risks and the value of their time, the return on capital is infinite. The company does not have to sell. In a "death-spiral" lesser-of convertible, the only way out is often to buy back the convertible at 130% of the issue price (excact % depends on the deal). ALTIF and IFSC did this. In an equity line, the company can stop selling shares at any time. In the most simple terms, the equity line is a mechanism that allows the company to sell stock at a limit price for a commision equal to 100%-discount rate + any additional commissions charged (sometime there are, sometimes not). There is a setup charge to initiate the mechanism which is not recoverable. Usually financing fees and/or stock warrants. Disclaimer: This is my interpretation and not legal or financial advice. Jon