After the Provisional TC last summer, Eclipse reported:
"The company is poised to move from aircraft development to production with $225 million in pre-IPO convertible debt funding arranged through UBS Investment Bank."
Nine months later, this company can hardly be considered to be in a production mode. Rather than financing production, UBS's $225m is more likely funding airplane re-engineering, airplane re-certification, and internal system re-organization so that the company can obtain their Production Certificate.
Last July, the company was forecasting the delivery of 50 units by the end of the year, 500 in 2007. If cash flow projections were based on these numbers, imagine the red ink that must be flowing down in Albuquerque. IMHO, Vern will need to go to the well for more funding to support the production build up.
Can he find another $225m in pre-IPO convertible debt or will he opt for the IPO?
Let's look at some related facts:
- A few weeks ago when Eclipse was recruiting in Wichita, their newspaper ad stated the company was offering employee stock options.
- April 10, in a comment against a previous post, an ex-employee stated, "When I first started at Eclipse I was told my 300 or so shares would be worth 150K to 350K at IPO depending on whose who believed, when I left I believed it would be worth around negative $8,000, the amount I would have spent to purchase my shares, so the answer to the question is I bought zero shares. "
- In spite of one missed goal after another the Eclipse BOD has remained publicly unconcerned with the stumbles the company has incurred.
- The Eclipse BOD has remained publicly quiet when the company called for the 60% progress payment on far more delivery positions than what can reasonably be expected to deliver. This could conceivably leave the board exposed to future litigation should deliveries fail to materialize and the hapless position holders lose their deposits.
Somebody has something up their sleeve to keep this company afloat. I would bet they are going to roll the dice on an IPO and my guess is it will come sooner rather than later.
Some readers will argue an IPO is not viable. The financials will not hold up and the institutional investors will shy away from this one. Others argue, the company will not get through the due diligence phase.
If the company is cutting back on color copies and asking employees to curtail their consumption of soda, funds must be getting a little tight. Something will have to happen fairly soon. Perhaps they will look to the penny stock market where due diligence falls on the shoulders of the individual investors.