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Biotech / Medical : ARIAD Pharmaceuticals -- Ignore unavailable to you. Want to Upgrade?

To: Jongmans who wrote (483)	2/8/1999 9:06:00 AM
From: Dr. John M. de Castro	Respond to of 4474

Martin, this is an interesting interpretation. I wonder what you think of the phrase "but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, non converted etc" This suggests that the series "C" preferred shareholder could get around this stipulation by doing more than one conversion and selling off the shares from the prior conversion, before converting again. What's your take on this? John de C

To: Jongmans who wrote (483)	2/8/1999 9:21:00 AM
From: Biomaven	Read Replies (1) \| Respond to of 4474

Martin, The 5% limitation is common in floorless deals, and is basically meaningless. Firstly, if the holder shorts before converting, then that holder is in no danger of hitting the 5% limit, as the converted shares will immediately be used to cover the short. (Remember the conversion doesn't necessarily happen all at once, instead it can happen in dribs and drabs.) Secondly, if there are a number of investors, the limit is 5% per group. Finally, there is often a provision tucked away somewhere about what happens if you hit the 5% limit (or the limit on the number of shares authorized or authorized for listing) - typically a forced redemption. (I haven't looked for this clause in the morass of this agreement). By the way, people shouldn't think of the preferred holders as hell-bent on driving the stock down to maximize the number of shares they get. What serves their interests best is to have a 21 day period in which they sell shares (short) without depressing the price except on 3 particular days where they want the price to be as low as possible. Their profits come from the differential in price between these 3 days and the rest of the period. I have never seen a discussion of whether driving the price down by shorting on these days would be viewed as illegal manipulation of the stock price. I have no idea who these particular holders are, but even if they are good guys who would never stoop to such a thing, they can likely sell their preferred to someone else who might. The real issue is that a deal like this creates fear and uncertainty among the shareholders and adds considerable financial complexity to the existing scientific complexity. For the next few years, the shareholders are likely going to be like restless kids on a long trip, forever whining "are they converted yet?" Of course none of the above means that the company can't dig itself out of this financing hole by producing a spectacular partnership, deal or product. Peter

To: Jongmans who wrote (483)	2/9/1999 12:22:00 AM
From: poodle	Respond to of 4474

"Am I right?" Let's compare our numbers first. 3 buyers, 4.99%, 21.9 M shares 0.0499(21.9+X)=X where X is max amount of shares. X=0.0499*21.9/0.9511=1.149 M, almost identical to your number. by 3, =3.447 M, this is different from yours 3.8 M, pobably because you calculated amount for several(but did not mention that?), not a single conversion. (Each conversion will increase amount of shares, so final amount of shares will be higher). I would expect at least 3 separate conversions. For the most optimistic 5M$ and 3.5 M share, price may be as low as 1.42. "Bottomless? Floorless ? I doubt..." Now it's your turn. Am I right? <g> There is no specified lowest conversion price, so, yes, floorless. Even in case when strict max amount of shares is given, would it determine exact "floor"? Not exactly, IHMO. Remaining part of the preferred stock is the property of the investors. Even if they can't convert into more shares, they do have reason to convert at the lowest possible price. The same amount of shares converted at the lowest price will leave more $ in remaining preferred. Well, the spiral mechanism in this case has clear limit, so there is a kind of floor. Our case seems to be even more complicated. Do you know any restriction that may prevent "group of investors" to redistribute preferred to smaller groups or to individuals? May individuals than convert up to 4.99% each? Finally, what about next conv. rounds? There are many real "convertibles experts" around, but they will not spend minute for the stock they can't short, especially given the quality of the document. If I understand you correctly, you are trying to find the floor and to get in. It seems to be not the easiest task. 4.99% warrant silent conversion (that's the only thing it's good for), so individual investors may have to play in the dark like newborn puppies. I wish you the best success and will follow the thread. The bright side of the story is that ARIA below 50M looks unrealistically cheap. The dark spot is that only insiders will know when (and if) some behemot is ready to buy. And someone may get extraordinary piece for the price of two years "standard" agreement, too often with questionable partner and outcome. Have a nice day.