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Transmeta's Risk Factors

Transmeta's Risk Factors - PCSTATS
Abstract: After looking over the 500 page IPO proposal, we pulled out the sections relating to the full disclosure of risk. Important info for investing to be sure.
Filed under: CPU / Processors Published:  Author: 
External Mfg. Website: Transmeta Sep 21 2000   Max Page  
Home > Reviews > CPU / Processors > Transmeta

Sections 28-31

28. RISKS RELATED TO THIS OFFERING THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR STOCK; THE STOCKS OF TECHNOLOGY COMPANIES HAVE EXPERIENCED EXTREME PRICE AND VOLUME FLUCTUATIONS; AND OUR STOCK PRICE MAY BE VOLATILE, WHICH COULD ADVERSELY AFFECT YOUR INVESTMENT.

Before this offering, there has been no public market for our common stock. An active public market for our common stock may not develop or be sustained after this offering. The price of the common stock in any such market may be higher or lower than the price you pay. If you purchase shares of common stock in this offering, you will pay a price that was not established in a competitive market. Rather, you will pay the price that we negotiated with the representatives of the underwriters. Many factors could cause the market price of our common stock to rise and fall, including: - variations in our quarterly results; - announcements of technological innovations by us or by our competitors; - introductions of new products or new pricing policies by us or by our competitors; - acquisitions or strategic alliances by us or by our competitors; - recruitment or departure of key personnel; - the gain or loss of significant orders; - the gain or loss of significant customers; - changes in the estimates of our operating performance or changes in recommendations by any securities analysts that elect to follow our stock; and - market conditions in our industry, the industries of our customers and the economy as a whole. In addition, stocks of technology companies have experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to these companies' operating performance. Public announcements by companies in our industry concerning, among other things, their performance, accounting practices or legal problems could cause fluctuations in the market for stocks of these and similar companies. These fluctuations could lower the market price of our common stock regardless of our actual operating performance. In the past, securities class action litigation has often been brought against a company following a period of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management's attention and resources, which could harm our operating results and our business.

29. OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES OWN A LARGE PERCENTAGE OF OUR COMPANY AND COULD SIGNIFICANTLY INFLUENCE THE OUTCOME OF ACTIONS IN WAYS THAT COULD ADVERSELY IMPACT OUR STOCK PRICE

We anticipate that our executive officers, directors, entities affiliated with them and other 5% or greater stockholders will, in total, beneficially own approximately % of our outstanding common stock after this offering. These stockholders, acting together, would be able to significantly influence all matters requiring approval by our stockholders, including the election of directors. Thus, actions might be taken even if other stockholders, including those who purchase shares in this offering, oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company, which could harm our stock price.

30. MANAGEMENT WILL HAVE DISCRETION OVER THE USE OF PROCEEDS FROM THIS OFFERING AND COULD SPEND OR INVEST THOSE PROCEEDS IN WAYS WITH WHICH YOU MIGHT NOT AGREE

We do not have a definitive quantified plan with respect to the use of the net proceeds of this offering. Our management will have broad discretion with respect to the use of the net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Some of the uses we currently anticipate include working capital and other general corporate purposes, including sales and marketing expenses, research and development expenses, general and administrative expenses and capital expenditures. In addition, we may use a portion of the net proceeds to acquire or invest in complementary businesses, technologies, product lines or products. These investments may not yield a favorable return.

31. SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.

The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market after this offering or the perception that these sales could occur. Based on shares outstanding as of June 30, 2000, upon completion of this offering, we will have outstanding shares of common stock, or shares if the underwriters' over-allotment option is exercised in full. Of these shares, the common stock sold in this offering will be freely tradeable except for any shares purchased by our "affiliates" as defined in Rule 144 under the Securities Act of 1933. All of the 56,526,243 remaining shares of common stock held by our existing shareholders will be subject to 180-day lock-up agreements with the underwriters or with us. Morgan Stanley & Co. Incorporated, in its sole discretion, may release any portion of the securities subject to these lock-up agreements. After the 180-day lock-up period, these shares may be sold in the public market, subject to prior registration or qualification for an exemption from registration, including, in the case of shares held by affiliates, to compliance with volume restrictions. After the lock-up period, of these shares will be immediately available for sale in the public market without registration under Rule 144. The remaining shares held by our existing stockholders will become available for sale under Rule 144 at varying times following the end of the 180-day lock-up period. Stockholders owning shares are entitled, pursuant to contracts providing for registration rights, to require us to register our securities owned by them for public sale. In addition, based on options outstanding as of June 30, 2000, after this offering, 7,277,040 shares will be issuable under outstanding options and warrants, approximately of which will be exercisable 180 days after this offering. We intend to file a registration statement to register for resale shares issuable upon the exercise of outstanding stock options and shares reserved for future issuance under our stock option and stock purchase plans.

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Contents of Article: Transmeta
 Pg 1.  Transmeta's Risk Factors
 Pg 2.  Sections 1-6
 Pg 3.  Sections 6-10
 Pg 4.  Sections 10-14
 Pg 5.  Sections 15-19
 Pg 6.  Sections 19-22
 Pg 7.  Sections 23-27
 Pg 8.  — Sections 28-31
 Pg 9.  sections 32-35

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