Ok, so it turns out that the $50M raised last week by XO Holdings (news, filings) was just the first volley of its attempt to raise cash at last. Today the company announced that it intends to raise $200M via a rights offering. Holders of the company's common stock will be able to purchase shares of what will be class D preferred stock. The company intends to use the money to fund its expansion and transformation. And they're doing it as promised, without raising any of that evil long term debt - at least not in name. Unexercised rights will be allocated to other shareholders on a pro rata basis who have indicated their desire to oversubscribed.
Now, what does this mean? At first blush it looks like a way for Icahn to further increase his ownership of the company, as it seems unlikely to me that minority shareholders who are currently quite angry with Icahn will now pony up their share of cash for these preferred shares, and hence Icahn will be buying more than his share if the company is to raise the full total.
However, I'm not quite sure what Icahn would get out of doing so. He already has access to the NOLs, and I don't think this would give him the opportunity to pull off a short-form merger or anything like that. And why pump more than his share of $200M into the company this way if he could buy out the rest of the common shares for less?
So right now it's unclear to me what's up. Perhaps he even intends *not* to buy his share of this offering. The PR seems to say that there are no voting rights with these class D preferreds, and hence he might not actually care if others buy them since he'd still have his access to the NOLs. In fact, the idea might simply be to raise straight debt without calling it by that name. We'll have to see what sort of interest rate they slap on this thing.
Confusing. Can anyone help clarify?