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General Growth Properties, Inc Message Board

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  • system_architect_enterprise system_architect_enterprise May 3, 2010 12:56 PM Flag

    BAM deal values $17.50, not $15/share

    Excellent question. Let's debate this because we all get smarter about this when we open the discussion.

    First, here is the document with the specific terms:
    http://www.ggp.com/content/Docs/TermSheet_22410.pdf

    Page 10 states that the company will not issue new stock below $10/share (of the new GGP). They establish a "floor" value of the $10+$5 in the Ts&Cs. Page 15 clearly states that the warrants are at $15/share.

    So this could "cap" the share price at $15/share given the warrants, but it does not dilute the share price down below $15/share. Simon is pretending that they will simply issue all the shares at $15/share to cover the warrants, and therefore there will be an immediate dilution of $2.50/share; but that is not the case. Simon would have been better served to state that the $15/share warrants effectively cap the growth of the share value beyond the $15/share.

    It is similar to if you got a stock option at $15/share. It doesn't do anything unless the share price goes ABOVE the strike price. Only then is it "in the money" and only then is there any dilutive effect. Further, it would dilute earnings etc. only above $15/share so only above that would we need to calculate the potential dilutive amount. Even then, once GGP emerges from bankruptcy, it all becomes a moot point because the actual value of GGP outside of bankruptcy is much higher.

 
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