AMD asks to double common stock to 1.5 billion shares

The best that AMD can do to raise fund for agressive expansion.

I always viewed issuance of new stock as a rob Peter to pay Paul tactic.

To those owning the stock:

what this means to you is that your stake in AMD is about to get cut in half with respect to the overall percentage of the company that you own.

Simple math states that if AMD currently has a market cap of 10billion and then the number of shares doubles, the price of each share has to get cut in half to maintain the same market cap of 10 billion.

If this passes, I project a new low of $4 to $5 per share at the bottom this summer.

This really worries me - if they double the # of shares the price will be $7 if amd has problems they could get delisted if their stock gets too low.

I see this as VERY good news.
Usually if a company is doing badly (like stock < $4), the company will try to merge shares to keep it from being de-listed.

Three things that have been posted recently...

1. AMD talks about Intel cherrypicking benchmarks, then cherrypicks data. And says in the same breath that they are 'honest'.

2. Suddenly there's a rumour of a Monday launch of Barcelona.

3. Now there's an SEC filing for a doubling of their shares...

Draw your own conclusion, but mine is that I am glad I don't own any AMD shares.

Too bad the market price will most likely have fully adjusted to this filing already by the time your shares get on the market. Any intro finance class will tell you that you can't beat the market based on information in the public domain, meaning the really public domain like the SEC. You've got MAYBE 20 mins, tops, before the market has adjusted to information like this.

What you really should have done is sold at the first C2D benches, and buy again immediately after this measure is approved - IF you still believe there is an upside to the stock.

But that's the information that really matters - that last bit. Dumping your shares now if you think there is an upside to the stock is most likely NOT a good move.[/u]

Was just in response to people saying dump the stock immediately monday morning

I finally went got a 24inch 1920x1200 and goddamn, how did I ever survive without it. But now I think, what a shame to have all these awesome pixels and no 8800GTX.. and my wallet's telling me there's barely enough left for a GTS.. sigh 8)

This is not a stock split --- stock splits are good news as they are signs that a company expects to perform better over the long term. This is asking the shareholders to lower the equity value of the existing stock so AMD can sell more of itself as a means to raise much needed capital this is done because one is running out of money.

Usually, if a company is doing badly they issue more stock to raise operating cash.... this is exactly what AMD is doing.

Monday, close of the stock market, AMD will be down in the 13 range, maybe less.... the market is going to take this a bad sign.

Too bad, I thought this was a stock split.
I thought AMD had better engineers than Nvidia. So, what could the problem be?

Well that was my point, it's not a damage control move, unless you think there will be further bad news ahead. By the time you dump your stock, market will have adjusted to this information meaning you will be going out at the lowest point if you think, for example, Barcelona will rock or whatever.

essentially we are saying the same thing. look back at what I typed as an "If then" factor on performance of upcoming releases.
Poor performance +split stock turns into damage control dumping half your shares.

Great performance+split stock=buying in at a great price to increase your shares.

Verndewed.... this is not a split .... when the 750 mill goes to 1.5 billion, existing shareholders will not get double their current shares.

A person owning 100 shares of AMD stock with 750 million shares will own 100 shares after AMD dilutes to 1.5 Billion shares.

In a split, a persion owning 100 shares at 10 bucks of company XYZ will own 200 shares at 5 bucks once company XYZ splits.

AMD is asking their shareholders to give over 1/2 of their equity.

I beg to differ on the bet of a dollar I bet one dollar its a split.

Why would a share owner give amd half their equity?I am sorry jack but no one in their right mind would do that.From your buy in ,they would be asking you for 15k as a gift.No I will stick with my position.SPLIT.

Vern, I have to agree with Jack on this. A split takes existing shares, and divides the individual share value by half while multiplying the total number of shares by 2 for a net sum zero change in any given stockholders portfolio value.

The real question to this move is why?

There are a bunch of possible reasons why. Try this one on for size. This is just one option, and not even my opinion. There are no facts to back this up, only that it exists as a possibility.

Protection.

It may be that by doubling the number of available stocks while reducing the cost, AMD is hoping to dillute current holders percentages while creating a rush on new stocks at lower proces thereby spreading total ownership and reducing the risk of a takeover.

We've all seen the take over rumour posts. Some of us are fairly skeptical, while others see the circumstances as at least presenting the opportunity. Some even see the situation as favorable. After the ATI buyout last year, when so many of us (myself included) said "no way it will happen", I would venture that at least some of us are more....open(?) to the possibility of an AMD takeover. I dont know, but among the possibilities, a takeover is an option regardless of its probability, and AMD attempting to protect itself by 'thickening' the stock numbers is also a possibility, even if not a realistic one.

Of course, Hector and the rest of the 'gang' could simply be trying to get their own mitts on more shares just for personal monetary gain, or trying get more cash for the company. Who knows with that bunch?

The price depends on what they're able to get new people coming in to pay. To be honest, this does give more credence to the private equity buyout, as it is entirely possible that AMD has institutional purchase commitment at a level that they think would make it worthwhile. It could also, to use the expression, grease the wheels for a private equity partner to come in and snap up a lot of those new shares and gain an impressive foothold into the company for less than a full-on acquisition would cost. (For those wondering, no, issuance of new stock is not based on a fixed market cap; if approved by the SEC, such actions tend to increase the market cap, although it then makes the stock that much more sensitive to earnings reports... AMD may be wagering on the fact that the new revenue coming in from ATI might be enough to allow them to expand the stock issuance with minimal impact on share price).

I don't see the stock being in complete freefall, but I would probably hold off on buying stock at the moment, as it wouldn't surprise me if it were down to $9-$11 in six months. On the plus side, however, a new issuance of stock might be a good time to get into AMD stock... it doesn't quite have the sizzle of an IPO, but acquiring new AMD stock at $10 wouldn't be a terrible investment, all things considered.

Yes, thats exactly what they do.
But this is not what AMD is doing. Its expanding its stock offering, meaning existing share holders portfolios do not expand in number of shares, but do shink in value per share. In short, current stock holders are taking it....in the shorts Meanwhile, AMD will be selling off the new shares.

Again, the question is why?

AMD has been struggleing with cash isues for a long time now...the purchase of ATI made it worse....and the thrashing of k8 by conroe was a sucker punch from right field that they werent expecting...its a formulae for disaster...at the time buying ati was smart..in hindsight it was stupid...i wish i could always see into the future...but im puting nvidia stock on my plans of purchase for monday morning

This IS a move of desperation, and that perception will drive prices even lower than the 50% hit it's already going to take. AMD has not much choice, really, since this is pretty much the only way to a) not be bought out and b) make more cash. Unless they really do have private equity lined in which case the situation becomes even more interesting.

Vern, I'll add in another buck to the pot for your bet No way this is a stock split. Stock splits usually happen because the company perceives that the stock price has gone too high and they want to lower the entry level to buying and selling the stock. There are several other reasons but because, as someone has pointed out, stock splits are zero-sum, they are used mainly for singalling purposes.

Guess we'll see on Monday

Well, speaking about psychological effect, this means that loss per share will be decreased from 0.34 to 0.17

Mirek

I don't think FTC will approve the buyout.

Also, AMD is nearly as large as nVidia. It is too difficult for nVidia to "swallow" AMD

we discused this in another thread. I think both IBM<Intel, and private investors would buy ATI, if Nvidia bought out AMD. Also, while AMD is infact a bit larger then Nvidia, AMD has a history of strugleing for cash...Nvidia on the other hand, has never lost cash,they simply go up, even when they released the FX cards, they increased marketshare, and net worth. They have also had two major loans as a company, and both were paid in less then half the time they were given to pay them back. Aa it stands right now, AMDs net value, is very near their net debt, Nvidia could almost trade cash in hand, and buy AMD out of debt. Also, a friend I have, who works as a procesor at BoA, whom issued the startuploan to Nvidia when they incorporated, told me Nvidia has been in talks with them to take a major loan, to the sum of almost 2 thirds of their total net worth, to help them expand into new markets. If you look, Sis,Intel,AMD,via, and Nvidia are all listed as active graphic chip makers. Even if Nvidia didnt spinoff ATI, which would be dumb becouse of the los of cash it would bring, that would still mean, AMD had much les then half of the total graphic market share.
If you look further, Nvidia has been rumored to be designed an x86 chip...only no way to sale it, as they dont have a license. Now they could buy Via...but somehow I doubt they would want Via, if they could have AMD, and the AMD fabs, for just a bit more

Given the recent rumors about a takeover, this looks like someone is desperately trying to prevent that or even playing with a possible aquisitor. It´s an interesting move.