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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Rich Wolf who wrote (9736)	3/23/1999 2:33:00 AM
From: Larry Brubaker	Respond to of 27311

Rich, this is the way I see it now. VLNC was paid $15 million by Castle Creek. $7.5 million in July and $7.5 million in December. The $15 million paid for both the preferred shares and the warrants. The December 8-k states that the $7.5 million for the first closing and the $7.5 million for the second closing is the aggregate price for both the preferred shares and the warrants. VLNC's December Statement of Consolidated Cash Flows indicates they received $11.8 million for the preferred shares. The Income Statement shows a $3,553,000 loss from "beneficial conversion feature on preferred stock." This $3.5 million loss appears to be a write down of the difference between the $6.78 purchase price for the 895,000 warrant shares and the actual purchase price for the warrants of $3.2 million. Add the $3.2 million purchase price of the warrants to the $11.8 million purchase price of the preferred shares and you get to $15 million. Therefore, in essence, Castle Creek is acquiring the 895,000 warrants for a price of about $3.40 per share, not $6.78 per share. Or, to look at the deal in its entirety, assuming the fixed conversion price of $6.03 for the preferred shares, Castle Creek paid $15 million for an aggregate of 3,434,608 shares of stock, or $4.36 per share. And they still have a variable rate conversion option for half of the preferred shares, which could lower their per-share cost. That's the way I see it. But this stuff is confusing enough that I am willing to entertain other hypotheses. Mooter, what say you? Isn't your line of work corporate finance?