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Case
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Reference no. 9-296-089
Published by: Harvard Business Publishing
Originally published in: 1996
Version: 26 January 2006
Length: 15 pages
Data source: Published sources

Abstract

Times Mirror Co (TMC) owns a substantial block of Netscape common stock purchased prior to Netscape's initial public offering, on which it has substantial unrealized gains. TMC is restricted from selling the stock in a public offering and is therefore considering a proposal by Morgan Stanley to issue Premium Equity Participating Securities (PEPS) to monetize its Netscape holdings. These PEPS would pay interest quarterly and be redeemable in five years at a price tied to the value of Netscape shares, subject to certain formulas and call provisions effectively apportioning the upside in Netscape stock between TMC and the PEPS investors. The tax treatment of the PEPS, while unclear, is of significant importance.
Location:
Other setting(s):
1995-1996

About

Abstract

Times Mirror Co (TMC) owns a substantial block of Netscape common stock purchased prior to Netscape's initial public offering, on which it has substantial unrealized gains. TMC is restricted from selling the stock in a public offering and is therefore considering a proposal by Morgan Stanley to issue Premium Equity Participating Securities (PEPS) to monetize its Netscape holdings. These PEPS would pay interest quarterly and be redeemable in five years at a price tied to the value of Netscape shares, subject to certain formulas and call provisions effectively apportioning the upside in Netscape stock between TMC and the PEPS investors. The tax treatment of the PEPS, while unclear, is of significant importance.

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Location:
Other setting(s):
1995-1996

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