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Red Hat Files For Followup Stock Offering
An anonymous reader writes "Red Hat has filed with the SEC for a followup offering of up to 4 million shares. The goal is 'To provide working capital and for other general corporate purposes including geographic expansion and possible strategic acquisitions or alliances.' The S-1 filing can be found
here. "
Some possible interesting takeover targets for RedHat (some already mentioned here, some not):
There would be a lot of good possible takeover targets! This will be interesting to watch.
--------- Webmaster, http://www.cpureview.com and
We have incurred operating losses in four of our previous five fiscal years, including our most recent fiscal year ended February 28, 1999, as well as in the nine months ended November 30, 1999. We expect to incur significant losses for the foreseeable future[.]
[W]e cannot be certain when or if we will achieve sustained profitability. Failure to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations.
And neither am I certain, from this vantage (albeit from the vantage of someone who missed out on the initial ipo frenzy). I plan to continue to use RedHat's products for the near future, just as I do with many IPOed companies' products which are being sold as a loss-leader, but it'll be some time before I plan to buy any of their stock. I trust that Linux will win out in the long run, but I'm by no means certain that RedHat will be the ultimate victor -- the barrier to entry is just too small. The winner might not even exist on the field at this moment.
Methinks it'll be time soon for a mutual fund that invests exclusively in Linux companies and does so across the board.
"If one is really a superior person, the fact is likely to leak out without too much assistance" -- John Andrew Holmes
Red Hat has real financial problems. Despite that $30 billion market capitalization everybody looks at, they only have about $500 million in assets from their IPO. They're trying to capture some of that market cap for their own use with a secondary IPO, and get another $350 million. But why the big rush? Because the insiders own about half the stock, but can't sell for six months after the IPO. The first restrictions on insider sales run out in February, at which time the founders can cash out, put the carpeting in on the yacht, and retire, if they so choose. Those sales can dwarf the number of shares in the secondary IPO, as the SEC filing points out. This will tend to drive the stock price down. But the real trouble is on the current-accounts side. Red Hat is a company that sells a product that they didn't pay to develop, can manufacture cheaply, sells for a reasonable retail price, and they still lose money. They don't have to pay for huge manufacturing plants, billion dollar wafer fabs, or building retail stores in malls. They should have become profitable as soon as they had any reasonable volume. like a hit record. But they're not. This raises real doubts about the business model. How's it supposed to ever become profitable? If it's not working now, why will it work later? If you don't know who the sucker is in the game, you're the sucker. (Buffet - the investor, not the singer.)