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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 WilTel Communications 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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telebud 12/4/2012 | 11:29:15 PM
re: New Corvis Investors Unveiled Warren Buffet is in it for the Corp Bonds.
He isn't in it for the Stocks.
Bond holders get paid first mabey that's what
he see's he's just waiting to be first one in line.
LightBeating 12/4/2012 | 11:29:15 PM
re: New Corvis Investors Unveiled As usual for LR, their Corvis stories always leave behind some important facts.

Of course, they love to insist on the fact that the stock has dropped from its IPO level of $83 down to $1.50, but of course don't mention that ALL telecom stocks suffered the same drop.

I like the one where they say that last quarter, revenues were "only" $27M. Of course, let's not mention that this was revenue from two weeks of Broadwing, which, on a quarterly basis, will give somewhat more than $150M for the next quarter. Oops! Isn't that more than Ciena ?

Then there's the typo about GibGE generating $1M to $2M revenue...

The comparison with WilTel is also interesting. Even with their more than $500M debt, they were acquired for more than $800M, which is more than the current market cap of Corvis. Couldn't that be the main reason why so many investors lined up to buy at $1.15 ?!

Finally, while "some say that selling bandwidth to carriers is a losing business", we will never know who these unnamed "some" people are. But we know that Warren Buffet has invested in Level 3, and in my opinion, he's not "some person".

LB







gea 12/4/2012 | 11:29:14 PM
re: New Corvis Investors Unveiled ..keeps getting wierder and wierder.

Sonehow, however, unless Corvis+Broadwing is in danger of immediate collapse, I don't believe Huber will let the equipment piece go.
bonowsfiber 12/4/2012 | 11:29:12 PM
re: New Corvis Investors Unveiled Buffet CONVERTED his bonds into equity -- he is now a shareholder of Level 3. His skin is in the game.

Back to Corvis -- looking at the names of the firm who invested, these firms are at the top of the heap when it comes to the quality of money a company would want to have flowing into their business. Wellington Management and Tudor Investment Management are as white-shoe as it comes and are known as firms who do meticulous research and look for long term investment ideas.

Highbridge Capital Management is run by the guy who manages a huge chunk of Harvard University's endowment -- they know a good thing when they see it and are also known as investors who are in it for the long term.

If I was going to dilute my firm by 17% and wanted to find investors who weren't going to cut and run as soon as their lock-up period ended these firms would be at the top of my list.

And yes, LightReading has butchered the facts in this article regarding revenues from GIG-BE as well as the revenue recognition from the Broadwing acquisition.

A poor job of proofreading indeed!



SIVROCX 12/4/2012 | 11:29:12 PM
re: New Corvis Investors Unveiled What is not clear is exactly why this cash is required (while more is better than less) and how it will be used? How do all the Corvis stock holders feel about having they share price diluted?
bonowsfiber 12/4/2012 | 11:29:11 PM
re: New Corvis Investors Unveiled "How do all the Corvis stock holders feel about having they share price diluted?"

The best indicator of shareholder sentiment is stock price. Having said this, Corvis has appreciated 30% from the lows reached on the day the deal was announced and is back to its pre-earnings realease price. It seems that dilution is not an issue.

As stated before, these are blue-chip investors who now own 17% of corvis. While not as well known in public circles as Mr. Buffet, their reputations as savvy investors within the financial community are sterling.

These firms see something in Corvis that is worth their investment and the market is responding.

likebizy 12/4/2012 | 11:29:11 PM
re: New Corvis Investors Unveiled There is no mystery!
I posted this last week, but here it is again so you will understand how the money will be used.
http://telephonyonline.com/ar/...
lufiber 12/4/2012 | 11:29:10 PM
re: New Corvis Investors Unveiled Does bonowsfiber = Bo Pedersen?
cfaller 12/4/2012 | 11:29:10 PM
re: New Corvis Investors Unveiled Are we sure there is any dilution? None of the releases I've read state that CORV is issuing new shares, however I could be getting too semantical...

bonowsfiber, please post any factual info you have that states that Buffet has converted his Level 3 bonds. I would find that interesting...
bonowsfiber 12/4/2012 | 11:29:09 PM
re: New Corvis Investors Unveiled this is from level3's website detailing the conversion by Buffet and Longleaf Partners.

http://www.level3.com/press/37...

These are new shares being issued by Corvis therefore there is dilution. The shares are restricted but once the time period of the retriction has expired, they can be sold in the open maret, pending notification of the SEC under rule 144a.



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