Private placement volume takes a break despite early stock surge; Visual Networks raises $10 million

By Sheri Kasprzak

New York, Aug. 10 - Even though stocks got off to a solid start Wednesday morning, PIPE issuance dwindled, especially as record-high oil prices pushed stocks down at the end of the day.

"Today, we were looking at oil as opposed to stocks," said one sell-sider. "It's almost always true that when oil shoots up that high, stocks are coming down, and no one really wanted to get a deal out under those conditions."

Another market source's attitude was simply "what goes up, must come down."

"No matter how high [volume gets], it's got to come down at some point," he said. "Stocks were lower, sure, but so what? [It] wasn't by that much. It's just a cycle of this business."

After making some headway this morning on word that the Federal Reserve would be raising short-term interest rates, stocks took a dive after oil prices reached $65 per barrel.

The Dow lost 21.26 to end at 10,594.41; the Nasdaq composite index slipped 16.38 to close at 2,157.81, and the S&P 500 edged down 2.25 to end at 1,229.13.

Heading up private placement news in the United States, Visual Networks Inc. wrapped up a $10 million convertible note offering with Special Situations Funds.

The notes mature on Dec. 31, 2007 and are convertible into common shares at $1.45 each. The coupon on the notes could not be determined by press time Wednesday, and the company's chief executive officer, Larry Barker, did not return requests for additional information.

"This important piece of financing enables us to shore up our balance sheet significantly," said Barker, in a statement. "Special Situations Funds has been a long-term supporter of the company and we are appreciative of this continued strong working relationship."

The company's stock slipped $0.05 to close at $1.68 Wednesday.

The proceeds will be used to pay an existing $2 million convertible debenture facility and for working capital and general corporate purposes.

According to the company's latest earnings report, released Tuesday, the company's net losses have improved since this time last year. For the quarter ended March 31, 2005, the company sustained a net loss of $414,000, compared to a net loss of $1,169,000 for the corresponding quarter in 2004.

As of Aug. 5, Visual Networks had 34,673,926 outstanding common shares.

Based in Rockville, Md., Visual Networks provides voice-over-internet protocol technologies.

Mer Telemanagement closes $2.8 million deal

Elsewhere in the tech sector, Ra'Anana, Israel's, Mer Telemanagement Solutions Ltd. completed a $2,812,500 private placement of shares, the company reported on Wednesday.

The company sold 937,500 shares at $3.00 each to institutional and private investors.

Investors in the offering also picked up warrants for 375,000 shares, exercisable at $4.00 each for three and a half years. Each investor received two warrants for every five shares purchased.

Apex Underwriting Ltd. was the placement agent.

Proceeds will be used to expand research and development, as well as sales and marketing.

Mer Telemanagement provides operations support systems for telecommunications companies, including customer service and billing support.

The company's stock lost $0.03 to close at $3.85 Wednesday.

Valkyries leads Canadian offerings

Valkyries Petroleum Corp. led private placement news in Canada Wednesday when it priced and then upsized a stock offering for C$66 million.

The proceeds from the deal will be used to satisfy a $50 million bridge loan the company entered into when it acquired a 70% interest in the Lagansky exploration block near the Caspian Sea.

Under the terms of the private placement, Valkyries hopes to sell 11 million shares at C$6.00 each on a non-brokered basis.

The deal was first announced early Wednesday afternoon as a C$60 million offering of 10 million shares and later was increased to C$66 million.

After the deal was announced, the Vancouver, B.C.-based oil exploration company's stock gained C$0.16 to end at C$6.51.

The proceeds not use to repay the loan will be used for general corporate purposes.

The offering was sparked, one market source said, from a continued surge in oil prices. On Wednesday, prices crept even higher, pulling stocks down. Oil settled up $1.93 at $65.00 per barrel.

"We've been seeing [energy deals] in bursts," he said. "I would expect that there would be more, seeing as oil has been up generously over the past week, week and a half. But it seems that most of the deals out there are linked to a specific need."

One energy company that completed an oversubscribed offering Wednesday was Forum Development Corp.

The company priced the deal, the market source said, when oil was still up and down, struggling to gain ground. Forum ultimately dropped its broker and headed into the market with a scaled-down, non-brokered deal for C$1 million.

The deal closed for C$1,202,095 Wednesday when the company sold 5,171,525 units at C$0.20 each and 671,000 flow-through shares at C$0.25 each.

The units include one share and one half-share warrant. The whole warrants provide for the purchase of an additional share at C$0.30 each for one year.

"In cases like this, it's a pure demonstration of how market changes really can affect how much or little you can expect to raise," said the market source. "And it's also a demonstration of how timing is so important in this market. If you wait too long, you may miss a window of demand. If you don't wait long enough, you may miss a surge like this."

Forum's stock lost C$0.005 to close at C$0.245 Wednesday.

Conceptus's stock closes higher

A day after pricing a $23 million private placement of shares, Conceptus, Inc.'s stock made gains on Wednesday.

The company's stock went up 10.77%, or $0.91, Wednesday, to end at $9.36.

On Tuesday, when the deal first priced, the San Carlos, Calif.-based biotech company's stock gained 5.62%, or $0.45, to end at $8.45.

The company intends to sell shares at $7.20 each to institutional investors and $8.00 each to its directors and officers.

"I haven't seen anything else [that would account for the rise in stock]," said one market source familiar with the health care sector. "It looks like it's going well for them."

The company announced earlier this week that it has terminated its promotional agreement with Gynecare Worldwide, a biotech company based out of Somerville, N.J.

Conceptus makes a form of permanent, noninvasive birth control.

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