Avanex raises $35 million in note offering; stocks stunt volume

By Sheri Kasprzak

Atlanta, May 17 - As stocks turned to push down private placement volume once again, Avanex Corp. led news Tuesday with the closing of its $35 million senior secured convertible notes offering.

The company sold the 8% notes, which mature May 19, 2008, to four institutional investors.

The notes are convertible into common shares at $1.21 each.

The investors also received warrants for 8,677,689 shares at $1.5125 each for three years.

The offering is expected to close May 19.

Banc of America Securities was the placement agent.

Based in Fremont, Calif., Avanex manufactures photonic components used to speed up fiber optic communications networks. The proceeds will be used for working capital and general corporate purposes, including restructuring activities.

On Tuesday, Avanex's stock closed down $0.04 at $1.08, but gained a penny in after-hours trading.

In the broader private placement market, sell-siders said an expected boost in volume may have been thwarted when stocks spent most of the day down. Stocks did recover by the end of the day with all the major indexes making gains.

"Things were looking better yesterday, but I think issuers may have been temporarily put off by lower stocks early in the day," said one sell-sider. "I don't think this is a long-term thing [the lull in volume] but a lot of it hinges upon what stocks are doing."

The Dow Jones Industrial Average closed up 79.59 at 10,331.88; the Nasdaq composite index gained 9.72 to end at 2,004.15 and the S&P 500 edged up 8.11 to end at 1,173.80.

Canada waiting on oil

In Canada, weaker oil prices on the whole have made that sector less appealing to investors, sell-siders there said. Oil and natural gas exploration companies make up the majority of private placement deals north of the border.

"Until oil makes gains, and some significant gains, I think it may stay this way for a while," said one Canadian sell-sider. "That really impacts issuance here because that's a huge chunk of where the volume comes from."

Oil prices did make some headway on Tuesday, gaining $0.36 to close at $48.97 per barrel, but the Canadian sell-sider said that's really not enough.

"I think if oil got above $50 [per barrel], we'd probably see some improvement," he said. "Until then, it's really anyone's guess if energy issuers will get back out there."

In fact, some oil companies are getting deals out of the market or drastically reducing the offerings they do have up for grabs.

Nordic Oil and Gas Ltd. on Tuesday reduced to C$1 million its previously announced C$5.6 million offering of flow-through share units. The company's chief executive officer Donald Benson noted the difficulties of selling common shares in this market, but noted flow-through shares are more appealing to investors.

Bidville closes $2.5 million deal

A $2.5 million private placement that Bidville, Inc. closed Monday was priced at a 54% premium to the company's closing stock price that day.

The company sold 2,500 shares of series A convertible preferred stock Monday to Delmount International Ltd. at $1,000 each.

Each preferred is convertible into 1,667 common shares at $0.60 each.

The conversion price is a 54% premium to the company's closing stock price of $0.39 on May 16.

Delmount also received warrants for 2.5 million shares, exercisable at $0.60 each through May 31, 2010.

"Online auction is incredibly popular right now," said one market source who saw the Bidville deal. "Investors know that, so a 50% premium really doesn't seem that odd given the fact that the company will probably take off very soon. I think the investors are banking on another eBay."

"Bidville has structured this financing primarily to support the launch of Bidville's next stage of marketing and advertising programs scheduled over the next 12 months," said the company's chief executive officer Michael Palandro in a statement.

"In addition, this funding will reinforce existing projects, continue to develop new opportunities and allow Bidville to stay committed to its loyal community of registered members and shareholders. Along with the proactive and consistent support of our financial partners, we believe increases in the current growth rate, opportunities for continued business development and continued website advancements will allow the company's growth and earnings potential to continue to be positively recognized by the marketplace."

Investor Delmount said in a statement that it has been monitoring Bidville's growth for the past six months and has been "impressed by the progress the company has made and are very bullish about the outlook of the company."

Bidville, based in Clearwater, Fla., is an online auction site operator. The proceeds will be used to develop existing projects and to establish new business opportunities.

Arotech's direct placement

Moving away from private placements, Arotech Corp. said it plans to raise $1,275,500 in a direct placement with several institutional investors.

The offering is comprised of 1,275,500 shares at $1 each, a 10% discount to the company's closing stock price of $1.11 on May 16.

After the offering was announced Tuesday morning, the company's stock dropped $0.08, or 7.21%, to close at $1.03.

The deal is scheduled to be funded by May 19.

Based in Auburn, Ala., Arotech manufactures vehicle armor, zinc-air batteries and fuel cells for the law enforcement and military sectors.

Healthaxis's stock drops

A day after closing a $5 million private placement of stock, Healthaxis Inc.'s stock took a dip Tuesday.

The company's stock slid $0.2199, or 11.76%, to close at $1.6501 Tuesday.

When the offering was first announced Monday, Healthaxis's stock gained $0.07 to close at $1.87.

The company sold shares at $2.25 each to Tak Investments Inc.

Based in Irving, Texas, Healthaxis provides technologies used for business process outsourcing, and claims and administration services for health benefit administrators and health insurance claims processors.

Onyx's stock still up

Two days after closing a $7,853,796 private placement, Onyx Software Corp.'s stock remained up.

The company's stock gained $0.07, or 2.37%, at $3.02 Tuesday.

After the deal wrapped on Friday, Onyx's stock gained $0.13, or 4.68%, to close at $2.91 and gained another $0.20 in after-hours trading. On Monday, the company's stock gained $0.04 to close at $2.95.

Onyx sold shares sold at $2.78 each to three directors and the company's chief financial officer.

A source familiar with the offering has said the solid pricing of the deal, to insiders, has helped the company's stock and will likely continue to benefit it, at least for a while.

Based in Bellevue, Wash., Onyx develops software to automate customer processes for corporate clients.

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