A 15 cent drop wipes out a full year of .08 convertible interest.
That is, if DMRJ selling is inhibiting the share price by 15 cents, and a refinance or buyout happens 12 month out at .15 less that it would have because of their sellling, then an entire year of interest conversion profit is wiped out by the loss on principal:
Max convertible shares: roughly 5% of 80m 4x a year = 16 m shares.
Gain on accrued int at avg of .48 selling price: 16m x (.48-.08) = $6.4m
Convertible principal shares = 43.75m ($3.5m principal / .08)
Reduction of profit at .15 lower price = 44m x .15 = $6.56m
It seems to me, DMRJ very well may decide they can't be converting at 48 cents at all.
I think it very well could be argued successfully that retail investor FEAR of DMRJ converting has resulted in a stock price some 50 cents less than it would be otherwise. It's in DMRJ's best interest that shareholders not have that fear.
The alternative for DMRJ that works out better for them is to put pressure on Implant Sciences to delay refinancing for longer than a year. They can only do this though if others aren't willing to refinance at much better terms, or if others are willing to refinance at much better terms but WM is an idiot. I don't believe the latter is true.
<<I think you guys are looking at DMRJ selling shares from the wrong end of the telescope. From their point of view they are managing risk and making money when they can. >>
Very true, that's the point I've been trying to make, but it would be foolish for them to ignore the impact their own selling has on how much money they eventually make upon the refinance or buyout that occurs.
<<Until quite recently there was a very real chance that IMSC would crash and burn leaving DMRJ with little but unsuccessfully commercialized IP.>>
Yes. Above all else - including converting the .08 interest - DMRJ wants Implant Sciences to survive so that some day they can get the principal back.
I might suggest too that rather then Glenn pointing to an end game where DMRJ gets their money back and more as the reason he was fired, it may well have had more to do with factors related to the possibility that they would NEVER get their money back -- ie the failed demonstration may have upset the TSA, followed by the Morpho protest that perhaps DMRJ thought IMSC should have warned them was possible...those things may have weight heavily on DMRJ, and along with perhaps feeling blindsided when the cargo orders didn't come in, they may have felt it was the last straw for Glenn..just speculating, of course.
last comment: Yesterday I was adding in the 15% on principal as something they get every year also, that would be lost upon refinance/buyout but that's a mistake because upon refinance/buyout they will just refinance someone else at 15%, so it seems to me that their concern really is just accrued interest converts, and the timing and price of the refinance.
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