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Entertainment Gaming Asia Inc. Message Board

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  • pjv2xyw9dww4b5 pjv2xyw9dww4b5 Sep 29, 2006 8:00 PM Flag

    8-K/A

    Assuming constant gross guaranteed minimum sales proceeds for the shares issued to Dolphin, VNX should want the guaranteed minimum sale price to be as high as possible since, for example, 100 shares with a guaranteed minimum sale price of $3.50 per share for two years are worth more to their recipient than 70 shares with a guaranteed minimum sale price of $5.00 per share for two years. As the guaranteed minimum sale price goes up (inversely varying the number of shares issued to keep the minimum gross sales proceeds constant), the transaction approaches a simple cash payment in nature as the value of the two-year put option component approaches zero.

    Nevertheless, if VNX issues more shares (inversely varying the guaranteed minimum sale price to keep the guaranteed minimum gross sales proceeds constant), it probably pays less to Dolphin to guarantee the minimum sale price. For example, if Dolphin grosses $350.00 by selling 100 shares at $2.50 per share with a guaranteed minimum sale price of $3.50 per share, VNX must pay $100.00, but if Dolphin grosses $350.00 by selling 70 shares at $2.50 per share with a guaranteed minimum sale price of $5.00 per share, VNX must pay $175.00.

    To summarize, my opinion is that VNX wants, assuming constant guaranteed minimum gross sales proceeds, a guaranteed minimum sale price high enough to make the two-year put option component less valuable to Dolphin but low enough, within reason, to lower the cash outlay required to guarantee the minimum sale price. The guaranteed minimum sale price would be a negotiated number not necessarily having much to do with anyone's opinion as to the "true" value per share of VNX.

 
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