Good post from another board:
1. Yes, Westaim's investment in NCST is only worth $56MM at the current market price. The remainder is $100MM. However, since Westaim has $50MM cash (in addition to $20MM cash held by its subsidiary NCST), the market thinks that IFire is only worth $50MM. However, analysts think that Westaim's stake in NCST is worth $170MM and IFire is worth $720MM.
2. The SEC filings tell the story:
< In February 2005, a wholly owned subsidiary of the Company issued $6,000 of convertible debentures to private investors. These debentures mature in February 2007, bear interest at 5% per annum, have no recourse to the Company and are convertible into a maximum of 12,000,000 non-voting common shares of the inactive subsidiary. If converted, the Company’s economic interest in the inactive subsidiary would be reduced to approximately 22% and the Company’s consolidated non-capital losses and research and development tax credits would be reduced by approximately $91,000 and $18,000, respectively. These convertible debentures are financial instruments which have both debt and equity components. The value assignable to the conversion option at the date of issue was determined to be immaterial. Interest expense on these debentures during 2005 amounted to $206 and was accrued in accounts payable and accrued liabilities at December 31, 2005. >
< In February 2005, a wholly owned subsidiary of the Company issued $6,000 of convertible debentures to private investors and in the second quarter of 2006 issued an additional $2,000 of convertible debentures. Of the $8,000 of convertible debentures outstanding on September 30, 2006, $251 is owned directly or indirectly by Officers of the Company. These debentures mature in July 2007, bear interest at 5% per annum, have no recourse to the Company and are convertible into a maximum of 16,000,000 non-voting common shares of the subsidiary. If converted, the Company’s economic interest in the subsidiary would be reduced to approximately 17.5% and the Company’s consolidated non-capital losses and research and development tax credits would be reduced by approximately $92,000 and $18,000 respectively. These convertible debentures are financial instruments which have both debt and equity components. The value assignable to the conversion option at the date of issue was determined to be immaterial. Interest expense on these debentures for the three months ended September 30, 2006 amounted to $101 (2005 — $76). Interest expense for the nine months ended September 30, 2006 amounted to $260 (2005 — $130). Interest paid in the third quarter of 2006 amounted to $148 and no interest was payable as at September 30, 2006. Subsequent to September 30, 2006, this subsidiary agreed to participate in a Plan of Arrangement with two unrelated parties. The proposed Plan of Arrangement will result in the reorganization of the participating companies into a proposed single new public company and the dilution of the Company’s investment in the new company to approximately 1.4%. Upon completion of the transaction, the investment will be carried at approximately $1,300, the Company’s pro rata interest in the book value of the new public company. The Company will also record a dilution gain of approximately $6,900, and $8,000 of convertible debentures and approximately $2,400 of cash of the subsidiary will no longer be consolidated in the Company’s consolidated balance sheet. The Plan of Arrangement is subject to regulatory, judicial and other approvals in the fourth quarter. >
IMO, the company owns a stake in some technology that they want to keep secret, and there is no dilution forthcoming.
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