Volume spikes despite lower stocks; First Union Real Estate wraps $9 million offering

By Sheri Kasprzak

Atlanta, June 20 - Private placement volume took a surprising turn upward Monday as investor interest in natural resources and biotechs pushed those sectors into the market.

In fact, the majority of the offerings put up for grabs Monday came from either oil-, mineral- or health-related companies.

Oil companies moved back into the market and, as oil prices reached record highs Monday, sell-siders said that is a trend that will continue this week.

Oil jumped $0.90 to close at $59.37 per barrel as the Organization for Petroleum Exporting Countries announced that it may be increasing the ceiling on its output.

"We definitely had some reaction after Friday's gains [in oil prices]," said one sell-sider. "We will undoubtedly see more of those companies this week after Monday's gains. Those are significant movements."

On Friday, oil prices settled up $1.89 to close at a new record high of $58.47 per barrel after soaring as high as $58.60.

Among the energy companies responding to Friday's high oil prices were Mission Oil & Gas Inc. with a C$12.3 million offering and Churchill Energy Inc., which priced a C$5 million offering that had been announced earlier.

Natural resources companies, like Entrée Gold Inc., which priced a C$13,875,226 offering Monday, were also in the game, sell-siders said.

"The deals today are in sectors that have been performing well," said one sell-sider when asked why volume picked up, even as stocks were down.

"Doesn't matter [that stocks were down]. When you look at it in terms of record highs, and we're seeing record highs in oil, record highs in gold, you're going to see more of those companies out looking for capital."

And that capital may be easier to get, another sell-sider, because news of those record high prices in sectors like oil and gold is driving investor interest.

"When you're hearing left and right that oil is up to this level or this other sector is up to this level, investors are going to bite," said that sell-sider. "Obviously pricing is important, but news helps too. And I think with [market] conditions as they are, pricing probably isn't a problem with most of these issuers."

The company that led PIPE news Monday, however, wasn't a natural resources company or a biopharmaceutical company, but a real estate investment trust.

Boston-based First Union Real Estate Equity and Mortgage Investments headed up action Monday with the closing of its $9 million offering of 6.5% series B-1 cumulative convertible preferred stock.

The company sold 360,000 preferred shares at $25 each.

The offering was part of a $100 million preferreds deal started back in February.

The preferreds are convertible into common shares at $4.50 each.

First Union's stock closed down a penny at $3.95 Monday.

Entrée gold's C$13.87 million deal

Moving back to natural resources, Entrée Gold Inc. announced its plans to raise up to C$13,875,226.

Vancouver, B.C.-based Entrée plans to sell up to 6,306,921 units at C$2.20 each.

The units include one share, one half-share A warrant and one half-share B warrant. The whole A warrants allow for an additional share at C$2.75 each for two years and the whole B warrants allow for an additional share at C$3 each for two years.

"Looks okay to me," said one sell-sider familiar with gold. "[Gold] is strong."

After the offering was announced Monday afternoon, the company's stock climbed C$0.29, or 13.74%, to close at C$2.40.

"This placement not only provides Entrée with funding it will need to pursue its wholly owned projects in Mongolia, it also establishes a new relationship with one of the world's mining giants," said Greg Crowe, the company's president and chief executive officer, in a statement, referring to Rio Tinto plc, which owns the company that will be purchasing the units. "We look forward to the mutually beneficial exploration and development of our Mongolian projects."

The offering is expected to closed in two tranches.

Entrée is a gold exploration company.

Grant Life Sciences raises $2 million

Heading to the biotechnology sector, another sector with a few new PIPE deals Monday, Grant Life Sciences, Inc. received agreements for $2 million in callable secured convertible notes from four institutional investors.

The 10% notes mature in three years and are convertible into common shares at the lower of $0.40 each or half of the average of the three lowest intraday trading prices for 20 trading days before conversion. The initial conversion price is $0.11 per share into a total of 18,181,818 common shares.

The investors received warrants for 7,692,308 shares, exercisable at $0.45 each for five years.

"This cash infusion is very significant at this stage in the evolution of Grant Life Sciences," said Stan Yakatan, the company's chairman and chief executive officer, in a statement. "In addition to providing us with working capital, this financing allows us to begin executing our plans to generate revenues from our AccuDx product line, and it allows us to substantially advance development of our cervical cancer blood test."

Based in Murray, Utah, Grant Life Sciences develops tests to detect and diagnose cervical cancer.

The company's stock closed unchanged at $0.28 Monday.

Focus Enhancements to raise $1.7 million

Focus Enhancements, Inc. said it has secured agreements for a stock deal for up to $1.7 million.

The company intends to issue up to 2.4 million shares at $0.70 each.

The investors will also receive warrants for up to 795,000 shares, exercisable at $0.70 each.

"This financing allows Focus Enhancements to invest further resources in providing a new generation of wireless-enabled, video-based consumer electronics into the home, as well as further strengthening our systems business," said Brett Moyer, the company's president and chief executive officer, in a statement.

"We are reiterating our previously stated financial outlook. We currently expect full-year 2005 revenue to be in the range of $25 million to $27 million, an increase of approximately 30% compared to the full-year 2004."

Focus said it plans to use the proceeds for general corporate purposes.

Based in Campbell, Calif., Focus is a digital video conversion and video production equipment company.

The company's stock gained $0.06, or 8.82%, to close at $0.74, and another $0.02 in after-hours trading.

Mikohn Gaming's stock rises

A day after announcing its plans to raise up to $40 million in a private placement of convertible notes, Mikohn Gaming Corp.'s stock made gains Monday.

The company's stock rose $0.33, or 2.17%, to close at $15.53.

On Friday, when the deal was first announced, the company's stock fell $0.38, or 2.44%, to close at $15.20 and lost another nickel in after-hours trading.

The notes are convertible into common shares at $12.19 each.

Las Vegas-based Mikohn develops products used in the gaming industry.

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