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Iipoed 12/5/2012 | 1:37:23 AM
re: Force10 Rakes It In Juniper and Extreme. Many of the same VCs. Extreme would be a lot cheaper. Also Bobby Johnson is not likely to play second fiddle to Juniper's management (he is still in his late 40s and loves the control). Extreme needs a Juniper badly, Foundry will survive and continue to grow at a good pace.
Upside_again 12/5/2012 | 1:37:22 AM
re: Force10 Rakes It In I'm not sure I agree with any of this M&A hoopla going forward when they just secured 75M funding.....More like any rumored deals never really got going and it's time to execute on thier own.
Cut_d_Crap 12/5/2012 | 1:36:56 AM
re: Force10 Rakes It In the larger question to ask of this company is how much dilution did the latest injection of new captial introduce? rumor has it force10's current level of authorized common stock hovers in the vacinity of 300,000,000 shares. at what price will they go public? are there too many outstanding shares for a realistic ipo?
299792458 12/5/2012 | 1:36:52 AM
re: Force10 Rakes It In If that is true, there will be at least a 1:3 reverse split, and probably more like a 1:6, before they could go IPO...

Think about it, with 300M shares outstanding at just over $3/share, they would have a $1B valuation...

Ain't gonna happen.

yesteryear 12/5/2012 | 1:36:46 AM
re: Force10 Rakes It In cut_d_crap said:

"the larger question to ask of this company is how much dilution did the latest injection of new captial introduce? rumor has it force10's current level of authorized common stock hovers in the vacinity of 300,000,000 shares. at what price will they go public? are there too many outstanding shares for a realistic ipo?"

Ok... real simplified Stock Market and IPO's 101 coming up (for those of you who don't already know all this...)

Answer: They'll go public at somewhere between $11 and $20 a share. There are never too many outstanding shares for a realistic ipo if the fundamentals of the company are sound.

As the previous response implies, the current dilution and latest injection has nothing to do with going public... neither does how many shares are allocated or outstanding. If you want to take a company public, the underwriter (and the company's board) has to figure out what makes sense... for example: most underwriters like to make offerings at the $15 to $20 range... buyable... but not out of reach, but also feels substantial (remember it's ALL psychology in this game.)

So you look at these numbers. First you decide how much capital you and the board want to inject into the company via the public offering. You gotta decide what kind of money you want in the bank after the ipo to do the next push... whatever that push is, be it cranking up manufacturing, building new plants, doing the next development, the next expansion, whatever... it doesn't matter what you exactly want the money for, although all this must be detailed in the prospectus you are sending out, and be reasonable, lest you risk lawsuits. Let's say that number for the sake of argument is $100M. At an IPO price of $20/share, that's 5,000,000 shares to be issued in the public offering... a nice number. Now you decide what you think an appropriate post-money valuation for the company would be. Valuing a company is a whole other science, topic, and skill. Let's say (and I am pulling this number out of my *** for an example). Let's say that number is $600M... ok... that means that post-IPO if you had priced everything right, then you should have a company with 30,000,000 shares outstanding... at $20/share equals your $600M valuation. This means that the current 300,000,000 shares pre-ipo need to translate into 25,000,000 (that's 30M post-ipo minus the 5M you intend to issue at the ipo...) How does one do this? Simple, and I know you've heard this before... reverse 12 to 1 split.

Wa-la... instantly, you've made it possible for a company to go public with reasonable numbers... Now what does that do to people internally, psychologically to see their shares divided by 12? Well if they were logical people who asked the right quesions going in, then absolutely nothing. People who take offers in private companies based on a number of shares offered them, without asking details of how many shares exist... what do you think the company is worth... what do you think it will be worth when it goes public... etc... deserve what they get.

Remember that when a company hits the market and the stock goes berzerk that first day... that money DOES NOT go into the company coffers. When it opens that first day, that is actually called the SECONDARY market. The primary market was the close clients of the investment bank that wrote up the IPO. They only offer their best clients a limited number of shares each at the IPO price. If things are done correctly, ALL the shares in an IPO are already sold to all these clients BEFORE the day that normal investors see it go public. It's the outsiders who go crazy and drive the price up... and then you have a company with a much higher than anticipated valuation.

The reverse can also happen... and it is a disaster... an underwriter overvalues the company... maybe doesn't even sell all the shares allocated in the primary market and the day of IPO, there is a significant number of shares to sell from the company directly still... the supply is huge... the demand is poor, the price drops on opening day... the company doesn't even get the capital it needs... it's valuation is way lower than they expected. It's an investment bank's (and company's) disaster.

When I see a company skyrocket on the first day (gee, it's been an awfully long time) I say to myself (unless of course I was offered the opportunity to buy some of that company at the IPO price)... "ach! That's a shame. The underwriter greatly underestimated the valuation of that company and f***ed the company." Who made all that money that first day? The good client of the underwriter... not the company. If I am in a company going public, I don't want to see the stock price skyrocket and stay at an ultra high level if I truly care about my company's future... because that means that we should have brought in a boatload more money for the company to use. That means we sold off company value to the underwriter's pal way cheap. I want the extra money in the company... not lining the underwriter's friends' pockets. If I am greedy and don't give a damn about the future of the company, of course I want it to skyrocket and stay there for at least the 6 month black out period so I can sell all my options and get the hell out. But basically, if the stock skyrockets and stays there, that's money out of the company's pocket... the underwriter screwed up the valuation. Ah, those were the days my friend.

Anyway, sorry for the rambling, oversimplified IPO discussion. I just got triggered by Cut_d_Crap's comment. Some things wake me up occasionally. Some people may not think of things this way, but you can make any company's numbers jibe to do a traditional looking IPO... now whether those numbers make sense or not determines whether the company stays on the market and becomes great, or disappears.

Cut_d_Crap 12/5/2012 | 1:36:40 AM
re: Force10 Rakes It In yesteryear,
if that is the case, whereby the "market" values only the stock that the company offers in the ipo, why is the market cap derived from the total outstanding shares, or float? lets say that force10 does have a total 300,000,000 shares issued in the multiple rounds of funding and to employees as stock options. is not the market cap calculated on the trading price multiplied by the 'float' and not just the stock that was issued for the ipo?
wilecoyote 12/5/2012 | 1:36:22 AM
re: Force10 Rakes It In Liquidation overhangs suck, and they are everywhere. But enough with the speculation: the Force10 employees will do fine in either an acquisition or IPO. Now that the financing is done everyone inside knows the terms. Do you see any of them leaving? No, you don't. If you saw Force10 resumes before, those people were either RIF'd or already gone with the old regime. Go check out the parking lot. It is full all the time. That is the best sign for health or sickness of any company, public or private. Just look at the parking lot.

Fixating on shares outstanding is a total waste of time. Ever heard of reverse splits? It comes down to percentages of ownership. At IPO, they will do a reverse split and no one will care, because it comes down to value, not gross number, of one's shares.

Post financing, the employees are retaining a significant stake. The way the financing was done, everyone wins, believe it or don't believe it. But stop bashing the only equipment startup with a chance. It's ridiculous. Leader in 10Gig, $10M/quarter, taking share from Cisco Cat 6K and now Foundry and Extreme, getting into carrier networks, winning across the board from large enterprise to supercomputing/education/scientific to carrier. Who else can do that?
yesteryear 12/5/2012 | 1:36:20 AM
re: Force10 Rakes It In Cut_d_Crap said:
"if that is the case, whereby the "market" values only the stock that the company offers in the ipo, why is the market cap derived from the total outstanding shares, or float?"

That is not what I said... go back and re-read the whole message. It should be clear... or if that is too much, read wile's comment, it's more succinct and makes the same point.

299792458 12/5/2012 | 1:36:17 AM
re: Force10 Rakes It In So why did Brear, former F10 VP of Worldwide Sales, bail and go to Foundry?

Most of the F10 employees were likely granted a gross number of shares, not a percent of the total outstanding. It is those people who the dilutions, and subsequent reverse splits hurt most...
Cut_d_Crap 12/5/2012 | 1:36:12 AM
re: Force10 Rakes It In thanks for the clarification. in rereading your post, all is now clar. maybe too much wine last night.
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