In April 2002, Rent Way entered
into a PIPE with Calm Waters Partnership, a
Wisconsin based privately held investment company owned by
Richard S. Strong. Shares issued under this type of agreement
cannot be sold until a registration
statement is filed with the SEC. That registration statement
was filed today.
According to the terms of the April 2002 deal, Calm Waters
acquired an aggregate of 1,000,000 shares of common stock for $6
per share, and warrants to acquire 100,000 shares. At the time,
RWY was trading above $9 per share. (As of 10:50 EST today RWY
was trading at $3.70)
The agreement also provided for the issuance of an
additional 333,000 warrants to acquire shares of common stock in
the event Rent Way does not achieve a financial performance
target for the twelve month period ending March 31, 2003. The
precise details of the 'financial performance target' are
unknown but include Rent Ways ability to refinance their debt at
a 'more favorable rate'.
In the registration statement filed with the SEC today, Rent
Way states that it does not expect to meet that target.
From SEC Filing
"...We do not expect to meet this target and
therefore expect to issue the additional warrants on or about
April 1, 2003. We expect the exercise price range of these
warrants to be between $1.50 and $2.50 per share."
PIPE, or 'Private Investment Public
When a private investment or mutual fund buys common stock for a
company at a discount to the current market value per share.
PIPEs are generally not looked upon favorably by investors
because these transactions usually involve hedge funds, which
are seeking a quick buck and are likely to sell the PIPE shares
in the market causing the share price to drop. The issuing
company can guard against this by delaying registration of the
shares (see Registration below).
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Shares purchased must be registered with the SEC for the deal to
be considered final. The shares cannot be sold until a
registration statement is filed.
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