Dollars and Jens
Monday, February 11, 2008
Raising Funds in a Hurry
This is probably just my own ignorance, but I hadn't heard of this idea of raising funds by issuing your own shareholders deep in-the-money stock options (other than as a takeover defense). I like the idea, at least intuitively. For one thing, any of the urgency discount they have to give to raise funds quickly accrues to existing shareholders. It also seems to me that the company could argue, on that basis, that the price they got for the shares is not the price they would have had to settle for (though that Bloomberg article doesn't indicate that they're doing so). They couldn't reasonably sell a large block shares at a discount to a third party without getting as much for them as they could without jeopardizing their financing, but what they did is part-way between an offering and a stock dividend; the only reason for not setting the strike price at zero is that they kind of need the money.
