Wave Systems Corp. (fka WAVXQ)

[rwk]

dig / you

are quite right that non-parallel lines eventually cross, so an extraploated loss is not baked in the cake.

But your exercise does a good job in showing that SKS would not have done this deal based upon the historic revenue growth path of either Wave or Safend. Clearly, the reasons for the deal are not found in the past, but rather in the future of anticipated revenue growth.


My guess at the turn of events:

When the VC partners saw the flatling and falling revenue numbers of Safend, they decided to sell, even though it meant taking a loss on their VC investment to date. They called their customer and most likely buyer, Wave. SKS could have said no thanks, but he needed the IP he was licensing. So he probably said he was happy with the current licensing agreement, but the VC's said the doors are closing in 90 days. Then he may have tried to buy only the IP, but the VC's probably weren't selling at a reasonable price. Buying the whole company met the exit needs of the VC's and gave management shareholders a place to continue their work. But since SKS didn't want the whole company, he got it at a much lower price than the starting offer.