I agree, ELGX benefits from taking advantage of the current cheap financing environment. There's nothing better than cheap capital to fund their impressive growth and pipeline to create shareholder value.
I don't think the financing will "hold off a buyout" because it fuels growth that will make the firm more attractive to a buyer. But I do agree that I would like to see the firm stay independent for at least a few more years because by then it may be worth a lot more. At that point I expect that there would be plenty of large or giant firms more than willing to buy ELGX at a nice premium price that's far in excess than what they would pay today.
"a very bullish move by management... a protection against a takeover exceeding $29/share maybe"
I agree that the capped call transaction signals management's bullish outlook because it allows the firm to economically recapture some of the benefit of a rising stock price that the convertible bond holders would reap. I don't view it as "protection against a takeover" because it would make the firm more valuable as the stock rises to the cap.
If all goes well, this deal should provide all the financing ELGX needs to achieve its goals. What's interesting about the structure is that ELGX will also enter a "capped call transaction." This will effectively hedge ELGX's convertible exposure against a certain amount of rise in the stock. In other words, the derivative is being used to effectively raise the conversion price of the notes. I have to assume this structure is more efficient or desirable than other alternatives. To hedge the capped call transaction, the dealer may need to buy a significant amount of stock. This effect may be offset by the convertible note holders shorting stock, so it's hard to know what, if any, are the short term trading implications. ELGX has been a great investment for me, so unless there is a fundamental change in this story, I'll continue to hold.