FiberTower: Pump Up the Volume

SAN FRANCISCO (TheStreet) -- FiberTower (FTWR) shares tumbled Monday on a spike in volume after wireless services backhaul provider said it had commenced an exchange offer for its senior secured notes that could see 336.7 million shares of new common stock issued.

FiberTower said it will issue interim 9% mandatorily redeemable convertible senior secured notes due 2012 in exchange for current 9% convertible senior secured notes due 2012. Based on certain conditions, the interim notes will be mandatorily redeemable for cash, shares of FiberTower common stock and new 9% senior secured notes.

If all of the outstanding existing notes are exchanged for interim notes and the interim notes are mandatorily redeemed, FiberTower said it will pay an aggregate of $14 million in cash and will issue an aggregate of 336.7 million shares of common stock, representing approximately 69% of outstanding shares (excluding shares issuable upon exercise of outstanding stock options and warrants), and $125 million principal amount of the new senior secured notes.

Shares of FiberTower were falling by 57 cents, or 40.5%, to 84 cents. Earlier in the session, the stock touched an intraday low of 83 cents. More than 10.9 million shares changed hands by 11:15 a.m. EDT Monday, compared to the stock's 50-day average daily volume of 1.3 million, according to the Nasdaq.

FiberTower has a 97.1 million-share float with a short interest float of only 0.3% as of Sept. 25, according to Yahoo! Finance. Insiders hold more than 35% of the company's shares with another 35% owned by institutions.

Some investors posting on Internet message boards noted that shareholder approval is required for the issuance of the additional shares in the mandatory redemption, and they argued the stock could bounce back from these oversold levels.

-- Written by Robert Holmes in New York.

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