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Thread: Could someone clarify this "Stock Dilution" talk for me?

  1. #1
    Gallep is offline
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    Question Could someone clarify this "Stock Dilution" talk for me?

    Please pardon my level of ignorance and possible complete backwards concept with this topic but I promise to keep up with anyone offering a knowledgeable hand.

    With Liberty obtaining a stake and received 12.5 million shares convertible to 40% common stock, what does that mean for us?

    When Analysts claim that the "stock is going to dilute and wipe out all the common holders", when and how is that going to happen?

  2. #2
    homer985 is offline
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    It's already happened.

    Look at a pie that is cut into 10 equal pieces in size... you and a bunch of others own all 10 pieces of that pie as it is... Now take away 4 of those pieces. You and all those other investors now only own 6 of those pieces. Your ownership percentage in Sirius just got chopped... instead of 100%, you now own just 60% of it.

    Wiped out? Exaggeration. The market absorbed the news already. The market value of the equity increased significantly today... the question is, where should Sirius be valued in a good economy without the threat of bankruptcy?

    If you think it should be valued at $6BB -- then prior to the Liberty dilution, the stock pps would be $1.57/share ($6BB divided by 3.8BB shares); however now that Liberty gets their 40%, the stock pps would only go up to about $0.95/share ($6BB divided by 6.3BB shares). Because there is more equity now.

    At $6BB, instead of $1.57 you get $0.95/share. At $10BB, instead of $2.63 you get $1.58/share.

    That's the impact of significant dilution....



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  3. #3
    Gallep is offline
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    Thanks Homer,
    So with me picking up 14k shares on March 3rd, I don't need to worry about those specific shares being "diluted"? Just a reverse split..whenever that happens-right?

  4. #4
    tucknroll is offline
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    Quote Originally Posted by Gallep View Post
    Thanks Homer,
    So with me picking up 14k shares on March 3rd, I don't need to worry about those specific shares being "diluted"? Just a reverse split..whenever that happens-right?
    gallep,

    doesn't matter when u bought, as soon as the 40% conversion takes place u get diluted....just my 2cents worth....enjoy the moment

  5. #5
    Gallep is offline
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    Quote Originally Posted by tucknroll View Post
    gallep,

    doesn't matter when u bought, as soon as the 40% conversion takes place u get diluted....just my 2cents worth....enjoy the moment

    Ha, thanks! At least when I'm in Vegas I know how, when, and why I'm loosing money at any given time. I don't think I'm up for this wall street crap.

  6. #6
    sxminvestor is offline
    Quote Originally Posted by homer985 View Post
    It's already happened.

    Look at a pie that is cut into 10 equal pieces in size... you and a bunch of others own all 10 pieces of that pie as it is... Now take away 4 of those pieces. You and all those other investors now only own 6 of those pieces. Your ownership percentage in Sirius just got chopped... instead of 100%, you now own just 60% of it.

    Wiped out? Exaggeration. The market absorbed the news already. The market value of the equity increased significantly today... the question is, where should Sirius be valued in a good economy without the threat of bankruptcy?

    If you think it should be valued at $6BB -- then prior to the Liberty dilution, the stock pps would be $1.57/share ($6BB divided by 3.8BB shares); however now that Liberty gets their 40%, the stock pps would only go up to about $0.95/share ($6BB divided by 6.3BB shares). Because there is more equity now.

    At $6BB, instead of $1.57 you get $0.95/share. At $10BB, instead of $2.63 you get $1.58/share.

    That's the impact of significant dilution....



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    Homer -

    That's the layman version of dilution that you just gave everyone - thanks !

    The 8k is out. If you can understand those calculations in this report that I just read then you might be the Rain Man.

    LOL

    check it out, it is wild !

  7. #7
    homer985 is offline
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    Quote Originally Posted by sxminvestor View Post
    The 8k is out. If you can understand those calculations in this report that I just read then you might be the Rain Man.
    All you need to know is the final percentage numbers -- they said that Liberty will have 40% of the common shares outstanding after conversion. So here's a simple calculation...

    Current outstanding sharecount X 100, divided by 60, minus the current outstanding sharecount... works like this:

    3,800,000,000 Current share count
    x 100
    ----------------
    380,000,000,000
    / 60
    ----------------
    6,333,000,000 Fully diluted sharecount
    - 3,800,000,000 Current sharecount (equal to 60%)
    ----------------
    = 2,533,000,000 Shares issued to Liberty (equal to 40%)



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  8. #8
    mogami is offline
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    dilution

    and SP does not equal .078 because it is already baked into the .13?

  9. Ad Fairy Senior Member

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