Tuesday, April 17, 2007 9:21:43 AM
Remember:
1. Market capitalization = (fully diluted outstanding shares) X (average PPS). It is the market perceived value of the company. So you can see, if OS goes up PPS goes down.
2. Fully diluted outstanding shares - The total number of shares that would be outstanding from all possible sources of conversion (convertible preferred stock in our case).
The removal of common from the float reduces the number of shares for every day trading.
The conversion from common stock to preferred stock actually increased the diluted OS because there is a premium paid for the conversion to common, typically, 1.1:1
Bottom line: Virtually nothing was changed. Just a little more dilution to the ‘Fully diluted OS’ and some float reduction.
I believe there is a misconception that OS was reduced and some of us were frustrated when the PPS didn’t rebound.
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