Palm said that it will remarket $49 million in shares that its investment partner Elevation Partners had purchased, in a bid to increase its cash flow ahead of the launch of its new Pre smartphone.
The smartphone maker said it will remarket about 18.5 million shares and that underwriters may buy an additional 2.8 million common shares to cover any potential over-allotments. Elevation Partners will recoup the $49 million and will use those funds to purchase shares of Palm's common stock at the public offering price. Palm secured a $100 million equity investment from Elevation Partners in December.
The company warned last week that it would have weaker sales in its fiscal third quarter, as demand for existing smartphones in its portfolio dropped in anticipation of the release of the Pre. Palm is expected to report revenue between $85 million and $90 million for its fiscal third quarter, well below Wall Street expectations and down from $312.1 million in the year-ago period. The company said at the time that selling stock was one option it was considering to boost its capital.
Palm is expected to launch the Pre sometime in the first half of the year. Sprint Nextel will have exclusive carrier rights to the device in the United States. Palm is pinning much of the future of the company on the success of the device, which combines users email inboxes, messaging conversations and contact lists into individual programs.
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