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  • Alcatel-Lucent: My Price Target Is $6.87 [View article]
    I have used the diluted number of shares reported by the company in the most recent earnings announcement.
    Feb 17 11:29 PM | 1 Like Like |Link to Comment
  • Alcatel-Lucent: My Price Target Is $6.87 [View article]
    If the management continue doing good work then we are looking at a $20 value in 2-3 years time.
    Feb 17 11:28 PM | 1 Like Like |Link to Comment
  • Alcatel-Lucent: Finally Something To Be Positive About? [View article]
    They have been getting orders regularly, but the competition in traditional networking equipment market is intense and margins are low. The main problems arise from mismanagement lack of direction.
    Apr 4 04:18 AM | Likes Like |Link to Comment
  • Alcatel-Lucent: Finally Something To Be Positive About? [View article]
    If they issue a lot of shares in the open market, then dilution will happen. However, I do not think it will happen soon, and it is more likely that the company will look at a rights issue.
    Apr 4 04:15 AM | Likes Like |Link to Comment
  • Alcatel-Lucent: Finally Something To Be Positive About? [View article]
    Normally, if a company issues new shares, then existing shareholders suffer dilution. However, in rights issue, existing shareholders are offered a "right" to buy shares proportionate to their current holdings at a discount. Also, dilution might not happen, if a troubled company issues shares to payoff debt or invest in something more lucrative, which can benefit the business in the long-term.

    Sometimes these actions can cause a positive response. As I said above, ALU cannot issue preferred shares or new debt due to the covenants of the debt it took on at the start of the year. It can also not go to the capital markets due to the low market price. The company wants to have an option to raise cash if needed. I do not think that rights issue will happen soon. In addition, ALU is also looking to sell some non-core assets to improve liquidity.

    Please read my previous article about the new CEO as I believe his actions will give a clear indication where the company is headed in the short-term as well as long-term. Previous article is also linked in this article.
    Apr 4 04:13 AM | Likes Like |Link to Comment
  • Alcatel-Lucent: Finally Something To Be Positive About? [View article]
    Serge, Thank you for reading. Nominal price is the face value of a security. It is different from the Market value, and both of these values are independent of each other. For a better performing company, market value will be higher than the nominal value. However, in ALU's case, Nominal price ( € 2.0) is higher than the market price ( €1.3). Nominal price is set when the company declares the authorized capital.

    Why ALU wants to decrease the nominal value? according to the French Law, a company cannot issue new shares below the nominal price of the stock. So, if the company wants to raise capital through equity, it cannot issue shares at the current nominal price. As I mentioned in the article, if the company opts for rights issue, then it will have to decrease the nominal price.

    Decreasing the nominal price of the shares should not have any impact on the market price. However, if the company opts to raise funds through share issue, then dilution will happen. It is not like stock splits and it wont affect the price. ALU cannot issue preferred shares due to debt covenants. So, raising capital is an issue for the company, and financial flexibility is needed.
    Apr 3 05:41 PM | 1 Like Like |Link to Comment
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