Stockholders' Equity |
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Stockholders' Equity |
NOTE 11 — STOCKHOLDERS’ EQUITY TOTAL Investment In January 2017, pursuant to a common stock purchase agreement dated as of December 19, 2016, between Tellurian Investments and TOTAL Delaware, Inc. (“TOTAL”), TOTAL purchased, and Tellurian Investments sold and issued to TOTAL, approximately 35.4 million shares of Tellurian Investments common stock for an aggregate purchase price of $207 million, net of offering costs. In connection with the Merger, the shares purchased by TOTAL were exchanged for 46 million shares of Tellurian common stock.
Tellurian Preferred Stock On March 31, 2017, GE Oil & Gas, Inc. (“GE”), the holder of all 5.5 million shares of Tellurian Investments Series A convertible preferred stock (the “Tellurian Investments Preferred Shares”), exchanged those shares into an equal number of shares of Tellurian Inc. Series B convertible preferred stock (the “Series B Preferred Stock”) pursuant to the terms of the Tellurian Investments Certificate of Incorporation (the “Preferred Share Exchange”). The terms of the Series B Preferred Stock are substantially similar to those of the Tellurian Investments Preferred Shares. The Series B Preferred Stock is exchangeable at any time into shares of the Company’s common stock on a one-for-one basis, subject to anti-dilution adjustments in certain circumstances. Pursuant to the terms of the Series B Preferred Stock, so long as any shares of Series B Preferred Stock are outstanding, the Company may not (i) pay or declare any dividends on its equity securities or (ii) make any redemptions or repurchases of such secruities other than ordinary course repurchases or deemed repurchases occurring in connection with the vesting or exercise of compensatory equity awards and related tax withholding. If the holders of the Series B Preferred Stock have not converted such shares into Tellurian common stock on or before November 23, 2022, the shares will automatically be converted into Tellurian common stock on a one-for-one basis. Each conversion ratio is subject to customary anti-dilution adjustments. Embedded Derivative The ability of GE to exchange the Tellurian Investments Preferred Shares into shares of Series B Preferred Stock or into shares of Tellurian common stock following the Merger required the fair value of such features to be bifurcated from the contract and recognized as an embedded derivative until the Merger Date. The fair value of the embedded derivative was determined through the use of a model which utilizes certain observable inputs such as the price of Magellan common stock at various points in time and the volatility of Magellan common stock over an assumed half-year and one-year holding period from February 10, 2017 and December 31, 2016, respectively. At each valuation date, the model also included (i) unobservable inputs related to the weighted probabilities of certain Merger-related scenarios and (ii) a discount for the lack of marketability determined through the use of commonly accepted methods. We have therefore classified the fair value measurements of this embedded derivative as Level 3 inputs. On the Merger Date, the embedded derivative was reclassified to additional paid-in capital in accordance with U.S. GAAP. The following table summarizes the changes in fair value for the embedded derivative (in thousands):
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