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New Corvis Investors Unveiled

Thirty-three investors have poured over $70 million cash into Corvis. Is it a good deal?

September 2, 2003

8 Min Read
New Corvis Investors Unveiled

A week after Corvis Corp. (Nasdaq: CORV) announced it has raised over $70 million in a private placement stock offering, the company has named its investors in public filings (see Corvis Looks to Sell More Stock).

Thirty-three investors are listed in the company’s form 8-K filed this morning with the Securities and Exchange Commission (SEC). These institutional investors have bought over 67 million shares of stock at $1.15 a share, giving the company about $73.2 million in new cash. This is in addition to the roughly $300 million in cash and short-term investments it already had at the end of June.

The level of investment runs the gamut, from tens of thousands of shares to millions.

The Riverview Group LLC invested the most capital as part of this offering, buying up over 10.4 million shares for an aggregate price tag of about $12.0 million. Raptor Global Portfolio Ltd. wasn’t far behind. It also bought over 10 million shares for about $11.5 million. Smithfield Fiduciary LLC had the third largest investment with over 7 million shares for a total of about $8.7 million.

Table 1:

Purchasers

Investment Firm

Number of Shares

Approximate Purchase Price

Chelsey Funding, LLC

Not Applicable

1,739,130

$2.0 Million

Cranshire Capital, LP

Not Applicable

1,733,913

$2.0 Million

Deephaven Small Cap Growth Fund, LLC

Not Applicable

3,043,478

$3.5 Million

Heimdall Investments Ltd.

HBK Investments L.P.

4,347,826

$5.0 Million

Columbia Ventures Corporation

Not Applicable

2,173,913

$2.5 Million

Nordural HF

Not Applicable

4,347,826

$5.0 Million

Smithfield Fiduciary, LLC

Highbridge Capital Management, LLC

7,608,696

$8.7 Million

Global Undervalued Securitoes Master Fund, LP

Not Applicable

2,608,696

$3.0 Million

The Riverview Group, LLC

Millennium Partners

10,434,782

$12.0 Million

Morgan Stanley Information Fund

Not Applicable

2,173,913

$2.5 Million

Portside Growth & Opportunity Fund

Ramius Capital Group, LLC

869,565

$1.0 Million

Ridgecrest Partners, LP

Not Applicable

470,565

$500,000

Catalyst International Ltd.

Not Applicable

185,000

$200,000

Quantum Partners LDC

Not Applicable

219,000

300,000

Ram Trading Ltd.

Ritchie Capital Management, LLC

2,608,696

$3.0 Million

Royal Bank of Canada

Not Applicable

869,565

$1.0 Million

Manfield Enterprises, Inc.

Sage Capital Growth Inc.

9,739,130

$1.2 Million

Tudor Proprietary Trading, LLC

Tudor Investment Corporation

1,035,652

$1.2 Million

The Raptor Global Portfolio Ltd.

Tudor Investment Corporation

10,040,869

$11.5 Million

The Tudor BVI Global Portfolio Ltd.

Tudor Investment Corporation

1,912,174

$2.2 Million

The Altar Rock Fund, LP

Tudor Investment Corporation

54,783

$60,000

British Columbia Investment Management Corp.

Wellington Management Company, LLP

136,000

$200,000

WTC-CIF Emerging Companies

Wellington Management Company, LLP

381,000

$400,000

WTC-CTF Emerging Companies Portfolio

Wellington Management Company, LLP

460,000

$500,000

Dow Chemical Retirement Plan

Wellington Management Company, LLP

271,000

$300,000

Government of Singapore Investment Corp.

Wellington Management Company, LLP

1,100,000

$1.3 Million

Howard Hughes Medical Institute

Wellington Management Company, LLP

289,000

$300,000

The Robert Wood Johnson Foundation

Wellington Management Company, LLP

306,500

$400,000

New York State Nurses Association Pension Plan

Wellington Management Company, LLP

169,000

$200,000

Oregon Investment Council

Wellington Management Company, LLP

770,000

$900,000

Retirement Program Plan for Employees of Union Carbide Corp.

Wellington Management Company, LLP

227,000

$300,000

Laborers' District Council and Contractors' of Ohio

Wellington Management Company, LLP

76,000

$90,000





Investors may be licking their chops at the hope that Corvis stock has cratered after a meteoric rise and fall. Back in the summer of 2000, the company’s stock shot up to $83 on its first day of trading (see Avici and Corvis Make Stunning Debuts). Three years later, it’s trading at around $1.50. Unlike some of its larger competitors, Corvis has a strong balance sheet with very little debt and lots of cash. But it still suffers from heavy losses and poor revenue performance. During the second quarter of 2003, it generated only $27 million in revenues with a loss of $45.8 million (see Corvis Narrows Q2 Loss).

So why would investors be interested in Corvis? A big part of the reason has to do with the company’s acquisition of bandwidth provider Broadwing Inc. (NYSE: BRW) (see Corvis & Broadwing: Together At Last).

“It’s safe to say that without Broadwing, we wouldn’t have done this deal,” says Kipling J. Peterson, chief investment strategist for Columbia Ventures Corp. “Corvis is a much different company than it was six months ago, let alone when it first went public.”Peterson’s firm invested over $7 million in Corvis: $2.5 million from the main company, Columbia Ventures, and $5.0 million from its subsidiary, Nordural HF.

Peterson says he sees potential on the equipment side of the business, too. He cites the highly anticipated Global Information Grid Bandwidth Expansion (GIG-BE) contract that analysts predict could generate about $150 to $200 million over the next two years for Corvis (see Corvis Solo in Bake-Off Boast). Some analysts say that Corvis could win some business with AT&T Corp. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), which also have active long-haul transport requests for proposal (see Verizon Deal: Too Soon to Hope?).

Rick Schafer, an analyst with CIBC World Markets says Corvis might be looking to get out of the equipment business altogether. During the second quarter of 2003, the company only generated $320,000 from equipment.

“If you look at Corvis, 99 percent of the revenue comes from Broadwing,” he says. “The equipment business is getting some traction, but it wouldn’t surprise me if they tried to sell off the equipment stuff.”

Investors are hopeful that the funding event will convince potential customers that the Broadwing subsidiary is viable on its own.

“Cash is king,” says Peterson. “It’s especially important for a service provider to have a strong balance sheet to show customers that you will be around for awhile.”

With or without the equipment business, Corvis still has a long road ahead of it. While Broadwing’s all-optical network is considered strong in comparison to its competitors, some say that selling bandwidth to carriers is a losing business model, considering the amount of unused bandwidth already available to them.

Several of Broadwing’s competitors have already gotten into serious financial trouble. Global Crossing Holdings Ltd., 360networks Inc., and Williams Communications Group (now WilTelCommunications Group Inc.) all filed for bankruptcy protection. And Level 3 Communications Inc. (Nasdaq: LVLT) and Qwest Communications International Inc. (NYSE: Q), which has a wholesale business in addition to a local access business, have also struggled financially under heavy debt loads.

Broadwing, itself, struggled under its former owner, Cincinnati Bell, but Peterson says that the new Broadwing is different.

“The Corvis Broadwing has a much different balance sheet than it did under Cincinnati Bell,” says Peterson. “It has virtually no debt and lots of cash. When you can go to customers and show them this kind of balance sheet, it gives them peace of mind.”

While he is bullish about the company’s outlook, he admits there are still risks.

“The stock is still selling under $2 a share, so it’s no lay-up.”

Corvis shares rose $0.09 (6.57%) to $1.46 in trading today.

It appears that, so far, investors like the idea of selling off some of the Corvis shares to institutional investors. The company, though public, is tightly held, because the majority shareholder is CEO and founder David Huber.

— Marguerite Reardon, Senior Editor, Light Reading

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