Friday, October 18, 2013 1:44:35 PM
STWA currently has about 165 million shares outstanding. They're allowed, by the current rules, to increase to 200 million. If this were simply a ploy for dilution, why haven't they already pushed it to the maximum allowable now? While no one would be too excited about issuing more shares simply to fund raise, you omit the arguments the company makes for upping the limit to 300 million, including but not limited to potential stock splits, or the issuance of stock to prevent a hostile takeover. While they don't note it here, I'd also make a case for the increased liquidity that comes along more with a larger number of shares, which tends to be an important question for whether or not a mutual funds would choose to invest in a particular stock.
However, with the question of takeover in mind, it becomes clear that this possibility is the reason why the amendments to Cecil and Bigger's contracts are written as they are. Is there a non-zero-percent risk that it's simply so they can cut and run? Sure. But it's much more likely that it's written such that, in the event of a hostile takeover (which would, as the amendment notes, move the office 25-miles from Santa Barbara or substantially change their responsibilities), that the CEO and CFO aren't screwed. Compare the language to what happens if he is terminated "with cause" as opposed to "without case".
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