Corvis Looks to Sell More Stock
This week, the company announced that several investors have agreed to buy 67,278,280 newly issued Corvis shares at $1.15 a share. Once Corvis pays its bankers, the transaction will give Corvis net proceeds of about $73.2 million. In 90 days, those investors will also get the right to purchase up to an additional 13,455,656 shares of common stock at $1.30 per share.
Considering that Corvis had about $323 million in cash, cash equivalents, and investments at end of June, one might wonder why, exactly, it would suddenly need $70 million in cash. Its struggles have been with its profit statements, not its balance sheet. And who were the investors that thought Corvis shares at $1.15 a pop would be a good buy?
For now, the company says the money raised is just something to help its business continue chugging along. "We're pleased to be able to raise money and to demonstrate that our investors have confidence in the company," says Andy Backman, Corvis' vice president of investor and public relations. "This will give us the flexibility we need to shore up our already strong balance sheet and continue to invest in the business as appropriate."
One source close to Corvis, however, says the funding event may have been something to convince a customer that Corvis' Broadwing Inc. (NYSE: BRW) subsidiary is capable of taking care of itself – that the service provider can command funding when it needs it and won't likely fall into the financial ruin it was in a couple of years ago (see Broadwing Looks Ahead).
The complete answers to who's helping fund Corvis – and why – might come to light in the next 30 days, when the company is scheduled to make additional filings with the Securities and Exchange Commission (SEC).
Corvis shares were down $0.06 to $1.19 in mid-afternoon trading on Thursday.
— Phil Harvey, Senior Editor, Light Reading