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Tellium Execs Lengthen Their Locks

Light Reading
News Analysis
Light Reading
11/15/2001

Yesterday, executives from Tellium Inc. (Nasdaq: TELM) agreed to extend the lockup period on their shares another 75 days until after the company announces fourth quarter 2001 results in January (see Tellium Extends Lockup).

Two days ago on November 13, 2001, Tellium’s 180-day lockup period on its shares officially ended. This will allow insiders who obtained shares prior to the company's IPO last May to sell their stock (see Market Gives Tellium a High Five). The result is that as of Tuesday, an additional 77 million shares of the company were released onto the open market. Analysts and investors following the company waited for this date with anticipation, fearing that company executives, venture capitalists, and other investors would start selling large numbers of shares onto the open market, putting pressure on the stock.

As a show of confidence in the company, the management team signed agreements yesterday restricting them from selling their shares until January. In total, the management team holds roughly 14.7 million shares of Tellium stock.

While this may be a nice gesture, in reality it may have minimal impact. The agreement extending the lockup period only includes shares owned by Tellium management. This means that 62 million shares, roughly 80 percent of the shares unlocked on Tuesday, are held by venture capitalists and other investors. Since these investors are not part of the extended lockup period, they may sell their shares at any time.

As of September 30, 2001, Tellium had 112,370,747 shares outstanding, including those held by executives. All told, including outstanding warrants and options, Tellium’s fully diluted common stock totals approximately 143,633,256 shares.

Tellium executives say the move was meant to send an important message to shareholders who have seen the stock dip below $5 a share in the past couple of months.

"People have no interest in selling stock at these levels. They feel the stock is incredibly undervalued," says Harry Carr, chairman and CEO of Tellium. "Second, we are here to build a great company. I think shareholders should realize we wouldn’t be doing this if we didn’t have confidence in the company’s prospects."

In trading Thursday, Tellium dropped 0.03 (0.52%) to 5.71 at the end of the day.

Tellium, like most of the optical sector, has been hit hard by the uncertainty in the economy and the cutbacks in capital spending by carriers. Like many optical IPOs before it, the key to Tellium's success will lie in expanding its customer base and fundamentals (see Tellium Stock Pops After Earnings and Qwest Slowdown Spooks Investors).

Some analysts covering the company say that this vote of confidence from management is a good sign and it might signal that Tellium has been able to sign up another customer. While Carr has remained tight-lipped on the subject, sources following the company say they believe Deutsche Telekom AG (NYSE: DT) will be announced as Tellium's fourth customer by the end of the quarter.

***
Another rumor about the company has been flying around Wall Street for the past two days: CFO Michael Losch is considering leaving. But both Losch and Carr deny the rumors.

”That is absolutely not true," says Losch. "I’m definitely not leaving, not after everything we’ve been through. There is no better place I can think of going right now."

"If Mike is leaving, it’s news to me,” says Carr.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
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hawkman
hawkman
12/4/2012 | 7:33:51 PM
re: Tellium Execs Lengthen Their Locks
The VCs and shareholders are going to drop that stock like a bad habit. Not that Tellium is a bad company, but I dont see how the share value will hold when all those people, except the employees that are locked in, can sell their shares. Again, the employees, the ones that made this all possible, are going to get screwed. Maybe they should throw in a layoff for good measure.
Two
Two
12/4/2012 | 7:33:50 PM
re: Tellium Execs Lengthen Their Locks
The VCs and shareholders are going to drop that stock like a bad habit. Not that Tellium is a bad company, but I dont see how the share value will hold when all those people, except the employees that are locked in, can sell their shares. Again, the employees, the ones that made this all possible, are going to get screwed. Maybe they should throw in a layoff for good measure.

You're wrong...only the executives signed these obligations.

As much as I would love to take this opportunity to bash Tellium, I can't. This is a pretty class act guesture. I bet Carr (who owns the lion's share of the 14 million) loses a lot of hair watching TELM bounce around...

..
donethat
donethat
12/4/2012 | 7:33:49 PM
re: Tellium Execs Lengthen Their Locks
There's no way of knowing what sort of gesture this is without knowing the strike price of the executive options. If they are currently underwater, the promise not to sell is meaningless.
ajo2
ajo2
12/4/2012 | 7:33:47 PM
re: Tellium Execs Lengthen Their Locks
>There's no way of knowing what sort of gesture
>this is without knowing the strike price of the
>executive options. If they are currently
>underwater, the promise not to sell is
>meaningless.

The chances are somewhere between slim and none that their options are "underwater". Unless the executives received the majority of their options within the past 11-12 months, chances are their average strike price is closer to $1 than $5. Any executive that has been there for any length of time likely has a large chuck of their options with strike prices well less than a $1.
HarveyMudd
HarveyMudd
12/4/2012 | 7:33:47 PM
re: Tellium Execs Lengthen Their Locks
It is an attempt on the part of Tellium to boost up the stock prices. Unless the sales figure go up significantly for many successive quarters, there no chance that the stock would move.
lite_boy
lite_boy
12/4/2012 | 7:33:28 PM
re: Tellium Execs Lengthen Their Locks
Carr's option price is about $2.2/share, he joined
the company at the beginning of 2000. Since then the option price increased to about $6/share in April. So more than 2/3 of employees are under water. For the other 1/3, most of their options
are at $1-$2 range. But the number of share they got is not as large as what the San Jose area people got.
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