Tuesday, August 4, 2009

Georgia Gulf shares +80% (GGC)

AlphaNinja - Why hasn't trading been halted in Georgia Gulf (GGC)stock?

Dow Jones reports that in response to a NYSE inquiry over suspicious trading in its common stock, Georgia Gulf responds (so helpfully!):

"Georgia Gulf policy is not to comment on stock activity"

Not that Yahoo message boards are a place to find great analysis, but they can offer a peak at the total confusion going on here (note the person who shorted today at $32 = $8 loss in less than an hour).

Georgia Gulf announced last week that they had dramatically reduced their debt, in exchange for covertible preferred and common stock, leading to a 1-25 reverse stock split:

Georgia Gulf previously announced the results of its private offers to exchange its outstanding 7.125 percent Senior Notes due 2013 (the “2013 notes”), 9.5 percent Senior Notes due 2014 (the “2014 notes”), and 10.75 percent Senior Subordinated Notes due 2016 (the “2016 notes” and, collectively with the 2013 notes and 2014 notes, the “notes”), for shares of its convertible preferred stock and shares of its common stock. Approximately $736.0 million, or 92.0 percent in aggregate principal amount, of the notes were accepted in exchange for approximately 30.2 million shares of convertible preferred stock and 1.3 million shares of common stock, giving effect to the 1-for-25 reverse stock split that became effective today.
Today, approximately $726.0 million of aggregate principal amount of notes, together with the Company's obligations for accrued interest under such notes, were extinguished in settlement of the exchange offers in exchange for shares of common and convertible preferred stock. The remaining approximately $10.0 million of principal amount of notes are contractually committed to be exchanged and the Company expects those to be canceled for shares of common and convertible preferred stock in the near term.

There doesn't seem to be a large group short the stock, so that is not the reason for the runup of the shares. Instead, the market looks to be re-valuing the company without the debt -->> maybe lending credence to the strategy that massive equity dilution in order to wipe out debt can be a good thing. I'll tell you one thing though, there's not too many people inside or outside the company who could accurately tell you how many shares are now outstanding.

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