SUNNYVALE, Calif. (AP) — Smartphone maker Palm said it will remarket more than $49 million of shares acquired by venture-capital firm Elevation Partners to improve its working capital and finance the launch of the Palm Pre and product development.
The Sunnyvale, Calif., company said it will remarket about 18.5 million shares and underwriters may purchase an additional 2.8 million common shares from Palm to cover over-allotments, if any.
Elevation Partners will recoup the $49 million it originally paid for the shares and expects to use the money to buy shares of Palm's common stock at the public offering price.
Standard & Poor's Ratings Services on Wednesday lowered its creditworthiness rating on Palm one notch further into junk territory, citing significant declines in revenue and liquidity. It dropped its rating to 'CCC' — three levels above default — from 'CCC+'. The outlook is negative.
The professional-grade Pre smartphone, which is in limited distribution, is the first of a series of new phones based on an updated architecture, and is the core of Palm's anticipated rejuvenation.
Analysts have expressed concern about the company's cash flow, expecting Palm to look for more capital as it ramps up marketing for the Pre.
The company said Tuesday it expects a steep slide in fiscal third-quarter revenue, hurt by flagging demand for its older-model phones. It expects sales of $85 million to $90 million, well below the average Wall Street projection of $115 million, according to a Thomson Reuters poll.
Shares of Palm rose 17 cents to $6.32 in Monday morning trading.