ESW Capital offers to fully backstop Redknee rights offering up to US $140M

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By Ted Liu

ESW Capital, LLC has issued an open letter and assures that the “funds for Redknee’s announced strategic restructuring can and will be raised.”

Redknee first announced plans for this restructuring with its First Quarter Fiscal 2017 earnings press release on February 8th, 2017. Further details around this strategic plan were announced in a release on February 23rd, 2017.

ESW Capital, LLC, via its affiliate Wave Systems, Corp., has provided the Redknee Board with two offers that should give all stakeholders, especially Redknee’s customers, certainty that these restructuring funds can be raised.

First offer: ESW commits to a full backstop of an US $54 million equity rights offering at US $0.50 per share, sufficient to fund the needed restructuring. Redknee will enter into long-term shared services agreements with ESW affiliates Crossover Markets, Inc. and DevFactory FZ-LLC and grant ESW a warrant to purchase 5,000,000 common shares at US $0.50 per share in consideration for the full backstop.

First offer would result in a dilution of approximately 113,000,000 additional shares.

Second offer: ESW commits to a full backstop of an US $140 million equity rights offering at US $0.50 per share, sufficient to both fund the needed restructuring AND redeem the Series A Preferred Stock. Redknee will guarantee ESW a minimum subscription of 25% of the non-ESW affiliated rights, and a warrant package of US $60 million priced at the rights offering price. The 4 Preferred Directors nominated by ESW will be removed as a part of redeeming the Series A Preferred Stock, instead Redknee will grant ESW 1-2 board seats in addition to those it may already be entitled to.

The second offer would result in a dilution of approximately 300,000,000 to 400,000,000 additional shares depending on the pricing election.

“We respect that this matter is in the hands of the 3 independent directors elected by the common shareholders to decide. We simply encourage them to take swift, decisive action that is clearly required to preserve value for all stakeholders (customers, shareholders, and employees alike),” said ESW Capital in its open letter.

photo credit: Redkneee