Corvis Looks to Sell More Stock

Apparently there is no such thing as too much cash for Corvis Corp. (Nasdaq: CORV), which now expects to raise more than $70 million in a private placement stock offering.

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

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telebud 12/4/2012 | 11:29:35 PM
re: Corvis Looks to Sell More Stock oh hum...yawn...
same old story.
whyiswhy 12/4/2012 | 11:30:03 PM
re: Corvis Looks to Sell More Stock Broadwing exec departed with $4.3M
By Mike Boyer
The Cincinnati Enquirer

Richard Ellenberger, former Broadwing Inc. CEO and architect of its failed broadband strategy, received $4.3 million in compensation on leaving the parent of Cincinnati Bell last October.

Ellenberger's pay included $3.5 million in lump sum severance in addition to $696,635 in salary and $100,962 in accrued vacation pay, according to the company's proxy statement issued this week.

Ellenberger, who received $1.48 million in salary and bonus in the prior year, received no bonus last year.

A company spokesman said the $3.5 million represented the remainder due Ellenberger under his 1999 employment agreement, which called for him to receive two times the salary and bonus target in the event of his termination.

Broadwing last week announced a financial recapitalization that it says will allow it to meet its debt payments through 2006.

The company has also announced plans to sell the Austin, Texas-based broadband business acquired in 1999 to a new, private company called CIII Communications Inc. owned by equipment supplier Corvis Corp. and Cequel III, a St. Louis telecommunications investment firm.

Broadwing will hold its annual shareholder's meeting April 29 at 11 a.m. at Union Terminal.


likebizy 12/4/2012 | 11:30:04 PM
re: Corvis Looks to Sell More Stock http://telephonyonline.com/ar/...
whyiswhy 12/4/2012 | 11:30:07 PM
re: Corvis Looks to Sell More Stock Planet next to Oliblish is no longer named Kolob, but rather: Corvislob!

LightBeating 12/4/2012 | 11:30:07 PM
re: Corvis Looks to Sell More Stock We had been told at the last CC that they were looking for more funds, so this is not unexpected. Considering that they bought back shares at 0.65, selling some at $1.15 is not a bad move.

The reason is unclear, but then it might just be that they found someone willing to chip in $77M (up to $90M with the option), so what the heck...let's just take it. Or it may be that they need a slightly better balance sheet to get GigBe or other contracts, or they want to play it safe with Broadwing if it takes a bit more time to become profitable. Could also be they have their eyes set on some other acquisition (pray it's not another Dorsal...). Another piece of network would be nice...

My feeling is they're going to give the equipment business a last chance until the end of this year, and if nothing happens (GigBe of AT&T or anything else), and if Broadwing is going well, then they will throw the towel, and maybe sell the equipment biz for a little money.

In any case, with burn rate going down ($30M last quarter, and they promised $15M for the equipment side by the end of the year), and close to $400M cash and no debt, plus $700-800M revenue from Broadwing, they have a pretty solid position, and are definitely here to stay.

lilgatsby 12/4/2012 | 11:30:10 PM
re: Corvis Looks to Sell More Stock I wonder if the corv sales team was behind this deal, since they obviously haven't sold anything else in the last 6-9 months.

dave77777 12/4/2012 | 11:30:11 PM
re: Corvis Looks to Sell More Stock They were always planning to find someone to take an equity stake in BRW.

Considering they bought back quite a few shares under a 1$, they have to feel pretty good about the deal.
sevenbrooks 12/4/2012 | 11:30:12 PM
re: Corvis Looks to Sell More Stock
Issue really is the lockup period. It seems likely that any large private placement like this would come with a 6 - 12 month lockup. So, its still a bet that the stock will be worth $1.15 at the expiration of the lockup.

It does seem like quite a gamble for both sides. If Corvis thought it was going to win a visible tender or two, it would have been better served by waiting to raise the money. Of course, the new 17% owner is betting on a win or two.

solver 12/4/2012 | 11:30:13 PM
re: Corvis Looks to Sell More Stock Sorry wasn't done yet, when I posted.

So, I'd put my kid's college fund in it if Dr. Hubris approached me and structured the buy price below the dilution.

I'm sure a lot of the shares that were sold have already changed hands, if there's no restriction as to when I can sell.
solver 12/4/2012 | 11:30:14 PM
re: Corvis Looks to Sell More Stock Think of it this way. The investor gets to buy all these shares of CORV at 1.15 when the stock was still trading at 1.40 when Corvis approached them about the possibility of ownership. Even with dilution, the new owners are likely able to make 5 cents profit per share if the stock drifts.
Then you add in the hype with the possibility of winning the GIGBE OTS project, you could possibly have a major upside potential with this speculative move. I'll bet the shares move north of $1.75 if Corvis bags the fed.
There's also the call option to buy more shares at $1.3 in 90 days, which will happen after the GIGBE decison. So you can work the options pricing into the deal as well.
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