The Terremark Premium

There are tons of investors who bought shares in web hosting companies and ISPs at high prices, only to see their holdings diminish as share values plunged in the Internet stock meltdown. If they'd known the company's shares would fall below $1, they wouldn't have bought at a higher price. Right? In recent weeks Terremark has stood that logic on its head, and has twice raised money by selling shares of its common stock for substantially more than their listed market value.

On April 1, the Miami-based developer of carrier hotels and network access points announced that it had raised $7.5 million by selling 10 million shares to company employees and investors at 75 cents a share. At the time, Terremark shares were trading on the NASDAQ at 46 cents, after falling as low as 22 cents earlier this year. By this week, the company's stock had rallied to 68 cents, raising the prospect that the insiders who paid a 50 percent premium less than a month ago may soon be "in the money" on their investment.

On Thursday, Terremark announced a deal to develop a NAP in Madrid, which included a provision in which its Spanish partners will pay $1 a share for 5 million shares of common stock - again, a 50 percent premium to the market price.

It remains to be seen how this strategy will work out over the long run. But in a dreadful capital market, the developers of the Technology Center of the Americas have been able to create confidence among insiders and business partners, and leverage that confidence into cash.