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Court approves sale of Alvarion to Valley Telecom

  • The court supervising Alvarion's (ALVR +1%) receivership has approved the sale of the company to Valley Telecom for a minimum of $10.4M (NIS38M). Alvarion's Receiver previously estimated that the company has $23M in debt.
  • A creditors plan is to be submitted no later than Oct. 2. If approved by Jan. 30, Valley Telecom will pay an additional $1.7M (NIS6.25M), and the Receiver will be issued shares representing 15% of outstanding shares post settlement.
  • Valley Telecom's previous revised minimum offer was $5.7M (NIS20.75M), excluding an additional amount from the sale of Alvarion's assets, inventory, and accounts receivable.
  • Assuming the equity structure of the previous offer, Valley Telecom will receive newly-issued shares representing 75% of shares outstanding. Existing shareholders will be diluted to 10%.
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Comments (7)
  • Fmcolton
    , contributor
    Comments (2) | Send Message
     
    So if I have 500 shares at $0.70 a share, what do I end up with after being diluted to 10%. I am new to this and don't understand how dilution works, I have researched it but can not find a definitive explanation.
    4 Sep 2013, 10:27 AM Reply Like
  • gdimitrov
    , contributor
    Comments (11) | Send Message
     
    Dilution would occur through the issuance of new shares to Valley Telecom and the Receiver. Under the assumed settlement, the two parties would receive 90% of outstanding shares after new shares are issued. You would still have 500 shares. However, there would be 10x more shares outstanding. If the value of the company remains the same, the value of the company is being divided among more shares. Under the simplifying assumption, the value of each of your shares would be $0.07.

     

    The caveat is that Alvarion's value as a company will change after it is acquired by another company and its debt is restructured.
    4 Sep 2013, 10:36 AM Reply Like
  • Fmcolton
    , contributor
    Comments (2) | Send Message
     
    So, the immediate acquisition will cause a loss of $0.63 a share due to the issuance of more shares, but there is potential to recoup this after the dust has settled?
    4 Sep 2013, 11:44 AM Reply Like
  • gdimitrov
    , contributor
    Comments (11) | Send Message
     
    It hinges on what value the market places on Alvarion after it exits receivership. For a current shareholder to break even after the dilution, the market would have to value Alvarion at 10x the valuation that it previously ascribed to its business. The issue is muddled however, because a significant part of the current valuation comes from M&A speculation.
    4 Sep 2013, 11:48 AM Reply Like
  • vegscott
    , contributor
    Comments (48) | Send Message
     
    Don't forget that what's left of the company will have shed not only liabilities, but also assets, not the least of which are the patents. So stockholders will have 10% of shares of their previous equity of what will be a rump company.
    4 Sep 2013, 03:19 PM Reply Like
  • Gunther Karger
    , contributor
    Comments (34) | Send Message
     
    Under U.s. bankruptcy process, the shareholders would have been left with zero because creditors get preference in trusteee (receiver) pauout and if debt exceeds assets, zero would be left for shareholders. The 10% is a gift. There also is a chance the new alvarion will do another reverse after all this settles to regain NASDAQ compliance which needs the stock to go over $1.00. The current share value is priced nearly purely on speculation as the present public shares are basically nearly worthless. Over the apst monthm shares have traded between 18 Cents and $1.20 driven basically by Globes articles and incorrectly interpreted by penny stock speculators as a chance to make a big and quick buck.
    Gunther is author of ""Thieves on Wall street"
    4 Sep 2013, 09:48 PM Reply Like
  • laurol
    , contributor
    Comment (1) | Send Message
     
    Is selling the shares and reporting the loss to IRS a good strategy? How can I sell and/or report the loss?
    24 Sep 2014, 12:19 PM Reply Like
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