Viv U gains green
USAI shares dip 7% on perceived stock dump
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Viv U sold the warrants to acquire shares in USAI to an affiliate of Deutsche Bank along with an option to acquire roughly 4.2 million more warrants as part of its debt reduction campaign. Deutsche Bank promptly issued an $805 million nine-year floating rate bond, exchangeable into some 28 million shares of USAI common stock.
Wall Street interpreted the sale as a large stock dump, and promptly punished USAI with a 7.3% fall in the e-commerce company's share price. This is despite the fact that the warrants won't convert into USAI common stock until the share price reaches at least $27.50, compared with today's $22.50.
Viv U owned the warrants as part of its acquisition of USA Networks last May, and the complex cross-holdings negotiated with Diller at the time.
Investment bank Prudential Securities said it doesn't believe the USAI share price drop reflects any fundamental weaknesses in the company.
Some interpreted the disposal as a preliminary step toward the unwinding of the deal between USAI and Viv U Entertainment. USAI owns 5.4% of VUE through preferred stock and has some effective veto power over possible disposal of the entertainment assets through a potentially hefty payment.
