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Technology Stocks : 3DFX -- Ignore unavailable to you. Want to Upgrade?

To: Patrick Grinsell who wrote (9677)	12/15/1998 12:29:00 PM
From: Scott Garee	Read Replies (1) \| Respond to of 16960

I've been perusing NVIDIA's latest S-1 IPO filing and this whole soap opera is starting to look pretty incestuous. Here's the relevant paragraph from the S-1 (Note 3 of financial statement): Mandatorily Convertible Notes Convertible subordinated non-interest bearing notes were issued to three major customers in July and August 1998 for a total of $11.0 million. The notes are subordinated to certain senior indebtedness. In the event that the Company issues and sells shares of its common stock in a firm commitment underwritten initial public offering pursuant to an effective registration statement yielding gross proceeds to the Company of at least $10.0 million prior to December 31, 1998, then upon the closing of such initial public offering the outstanding principal balance of the note automatically converts to common stock of the Company at a conversion price equal to 90% of the price at which the common stock is sold to the public. In the event that a qualifying initial public offering is not completed by December 31, 1998, then, on January 15, 1999, the outstanding principal balance of these notes automatically converts into common stock of the Company at a conversion price equal to $7.00 per share of common stock. In the event of a merger, consolidation, acquisition or similar corporate event prior to January 15, 1999 whereby greater than 50% of the voting securities of the Company becomes acquired by a third party, then the outstanding principal automatically converts into common stock of the Company at a conversion price equal to 90% of the price at which the common stock (on an as-converted basis) is acquired by such third party. Now, the three owners of this $11M worth of convertible stock are STBI, DIMD, and CREAF. I've been digging everywhere in Edgar, but can't find out who has $5M and which are the two that have $3M each. Anyone remember? I'll eat my hat if NVIDIA pulls the trigger on the IPO before December 31, 1998, so we're then left with the following: NVIDIA is in deep trouble and STBI, CREAF, and DIMD each own a chunk of NVIDIA that is looking decidedly like expensive wallpaper. My and a partner's take on the balance sheet is NVIDIA would be lucky to get $1 per share unless things have really improved since 25-OCT. They would probably get some credit for intellectual property, but a debit for lawsuits. If NVIDIA pulls the trigger between 31-DEC and 15-JAN I'm not sure what happens. Anyone have an idea of what the $7 shares would be worth after an IPO? There's a total of $11M/$7 or 1.6M shares owned by the three suitors. That's a good chunk of the existing 14M shares. Is the value of common stock of the private company valued at the time of IPO? If NVIDIA doesn't do the IPO someone has to buy them. I would guess it would be CREAF who would buy them. DIMD doesn't have the cash or the stock price to compete in a price battle. Now, if anyone buys them prior to 15-JAN then each of these three companies gets a chunk of the buyer's common stock at a 10% discount. So STBI (TDFX) and DIMD end up with a chunk of CREAF. Somehow I would guess the acquisition would not be until after 15-JAN. OK, any accountants want to digest this further? It's all a side show to the STBI deal, but I love all the twists. Pat, I had forgotten about the STBI co-location arrangements. Yes, these are big. Didn't DIMD say they were going to try something similar? My searching of filings reminded me that STBI also has a pending shareholder lawsuit.