InterDigital Inc (IDCC)

[Fog1937]

Let's make it simple:
(1)IDCC issued $230 million in a convertible note, convertible to a total of 4 million shares @ $55 per.
(2)At the same time IDCC bought an option for 4 million shares at a cost of $42 million.
(3)Next it sold a warrant for 4 million shares @ $64 per share and got $30 million for it.
At the end where will it leave us:
(1) and (2) net out in the number of shares and leaves the company with $230 million, less $42 million in 'cash' in the bank and no change in the number of shares outstanding.
(3) the company will issue 4 million shares @ 64 per share and got paid already $30 million. Potentially (if the stock price exceeds $64) it must issue 4 million new shares but will receive an additional $256 million in proceeds. This part will be dilutive in the number of outstanding shares. However, since this is a transaction in the Company's equity account, it is a tax free transaction. Think of it this way; if IDCC settled this warrant with Treasury Stock ( purchased in the open market in the past at or below $40 /share), then the difference would also be a 'tax free' gain.