"Par Value $0.001" [LWN.net]

"Par Value $0.001"

Posted Jul 29, 2003 20:13 UTC (Tue) by markhb (guest, #1003)
In reply to: "Par Value $0.001" by corbet
Parent article: SCO execs cash in on suit spotlight (ZDNet)

First, I'd like to clear up an ambiguity in what I posted... when I mentioned "FUD regarding the reporter's intelligence," I was referring to the intelligence of the ZDNet reporter, one Patrick Gray, not the intelligence of the LWN editor who posted the article. I hope no offence was taken.

Second, the original article was badly written. It gives the impression that the 45 million shares yet to be registered would be offered for sale at the $0.001 price, yet that is completely untrue... if registered, they would start at whatever the current market price is. Yes, they would demolish the stock price due to simple supply and demand (I've gotten caught in a sudden dilution myself :( ), but it's not the simple weighted average that "Considering the company has only 13.5 million shares floating around, it is conceivable that the issuance of 45 million shares at a tenth of a cent each may dilute the list price somewhat" implies. Personally, I'm more interested in the various option packages SCO issued with exercise dates next year: all in the $4.75 - $6.13 / share range. Take a look at: http://ir.sco.com/EdgarDetail.cfm?CompanyID=CALD&CIK=1102542&FID=1102542-03-38&SID=03-00 http://ir.sco.com/EdgarDetail.cfm?CompanyID=CALD&CIK=1102542&FID=1102542-03-37&SID=03-00 http://ir.sco.com/EdgarDetail.cfm?CompanyID=CALD&CIK=1102542&FID=1102542-03-36&SID=03-00 http://ir.sco.com/EdgarDetail.cfm?CompanyID=CALD&CIK=1102542&FID=1102542-03-35&SID=03-00 http://ir.sco.com/EdgarDetail.cfm?CompanyID=CALD&CIK=1102542&FID=1102542-03-34&SID=03-00 http://ir.sco.com/EdgarDetail.cfm?CompanyID=CALD&CIK=1102542&FID=1102542-03-33&SID=03-00
Quite the payout to the Board....

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"Par Value $0.001"

Posted Jul 30, 2003 16:18 UTC (Wed) by CCB (guest, #13491) [Link]

Well actually the Par value is the share of the capital that is sold out to the public. Now you can have different series of shares with different par value. Let's take two examples: right now mkt capitalization is around $ 170 Mio, it's the price shs times the outstanding number of shares.

If the existing shares have a par value of $1, then the dilution will be small: because $13.5 Mio of par value are evaluated to $170 Mio, add 45 Mio shs of $0.001 par value means: $45'000 more par value dilution is 45'000/13.5 Mio = 0.3% --> shs price moves from 13 to 12.96...

If the existing shares have a par value of $0.001 also, then you just add 45 Mio to the existing 13.5 Mio --> you divide the price by 4.33 (it would be (45+13.5)/13.5) shs price moves from 13 to 3...

Here what we see is just that SCO can issue up to 45 Mio shares, it doesn't mean that they necessarily will... I beleive that just give them the ability to issue nearly $600 Mio worth of shares... That's a pretty impressive machine to produce cash!!!! Important part is: their BoD has received the authority to issue them without even asking the shareholders...

As such the next Fed. Reserve could have given them the keys to their printing machine with the ink and the paper to print notes up to $ 600 Mio... this wouldn't be quite legal... but issuing shares is!!!

Now we all know that SCO is struggling to increase its revenues, as such we can assume that the company itself is not worth a lot, let's say $20 Mio... well the market considers that SCO is worth $ 170 Mio... quite a premium: $150 Mio more... Well this what the market expect from the SCO vs. IBM case: they ask $3 bn... the market thinks that there is probability that SCO will cash in only $150 Mio... 150/3000 = 5% chance that SCO wins... In my books it would mean that SCO is doomed with 95% chance of failure...

well doomed perhaps but now they have a purchase power of around $ 600 Mio... in shares... so my advise: don't be the last to sell! (I guess this is what SCO management is doing...)