It appears that AMD had a deal with the now bankrupt Lehman Brothers firm to help prevent stock dilution due to the large debt AMD is in.
Now with Lehman out of the picture AMD is short the stocks that Lehman bought up as well as roughly 182 Million US Dollars.
AMD can try to buy those shares back at their current low of $2.27 per share as a last ditch effort to prevent the dilution of shares.
Business Week has more here.
AMD's debt offering, from April 2007, was a survival move. The company had to raise money to stay afloat as it bled cash from its acquisition of graphics-chip maker ATI Technologies and a bruising price battle with Intel Corp.
AMD said in a regulatory filing Friday that because of Lehman Brothers' bankruptcy, the bank defaulted on the so-called "capped call" transaction and that AMD could no longer count on it to prevent dilution.
The deal was supposed to work like this: AMD paid Lehman Brothers $182 million to scoop up enough AMD shares before 2015, when the convertible senior notes come due, so that it could hand those shares back to AMD and cancel out the new shares that would flood the market when the senior notes were converted into shares of stock.
- > NEXT STORY: Rahul Sood Predicts End of the high-end gaming PC
- < PREVIOUS STORY: OCZ takes covers off Dominatrix Laser Gaming Mouse