Many of the warrants that have been issued by ASEN are subject to having their exercise price reduced due to subsequent "down round" stock issuances. ASEN recently announced another acquisition that is expected to close by the end of this month, and for some of the consideration they intend to issue stock. Assuming their stock price stays where it is today that would mean that, upon that transaction closing, the exercise price of these warrants will get reduced.
Also, the equity offering that ASEN did in July had some particularly toxic provisions in it, viz.:
" On July 15, 2011, the Company closed a private placement offering of $12,980,003 through the issuance of (i) 2,260,870 shares of our common stock at a price of $5.75 per share, (ii) Series A warrants to purchase 1,130,435 shares of common stock at a per share exercise price of $9.00; and (iii) Series B warrants to purchase a number of shares of common stock, which shall only be exercisable if (A) the market price (as defined below) of our common stock on the 30th trading day following the earlier of (i) the effective date of a registration statement to sell the shares of common stock and the Series A warrant shares, and (ii) the date on which the purchasers in the private placement can freely sell the shares of common stock pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, without restriction (the “Eligibility Date”) is less than the purchase price in the offering or $5.75; and (B) upon certain dilutive occurrences."
My take-away from this is that come 1/15/12 (i.e. the date that the shares issued in this offering become free-trading), I would fully expect that the placees in this offering to start blowing out their stock over the next 30 days, knowing that they will get more free shares to replace the stock sold by virtue of how that Series B Warrant provision
works.
I believe that the reason that ASEN is trying to rush to lock up XBOR now vs. later is that they realize that the value of their stock is about to head south starting on 1/15, so this will be the best shot they have at getting this nice prize before their stock price goes all to hell.
I fervently hope that XBOR management, in the course of their due diligence, realizes what is going on here and walks away from any deal that may be proposed by ASEN, at least for the time being. Once all this weird financing stuff that ASEN has done gets sorted out (maybe in the spring?) then it might make some sense to talk to them.
My impression on looking at ASEN is that they are true oil & gas superstars but have unfortunately gotten some very poor financial advice regarding how they structured their financings. Yes, maybe the results in the field will be so phenomenal that it will overcome all these financing screw-ups but I wouldn't bet on it.
