Prior to the offering expiration the stock price was well below the $13 offering minimum. About one week prior to offering expiration, the stock got up to $13 and then slighly above.

Towne Bank knew that it had a certain amount of the offering already sold by this time since the prospectus had been out there for months and therefore knew that it had to produce a certain number of shares. They could either issue new shares or sell treasury stock.

Would it have been legal for them to purchase the shares that needed to be delivered on the open market (i.e. below $13) and then fill the offering with those shares purchased at $13.38?

For example, purchasing 10,000 shares at $12.50 and then using those shares to fill an offering at $13.38 would net a profit of $8,800.

Also, purchasing the shares to deliver on the open market would artificially inflate the price...which in turn would limit Towne Bank's downside when the notes could be converted.

If this is legal, it seems like a likely scenario given that the stock has fallen off a cliff ever since the offering was closed. the price was artificially inflated because Towne Bank was buying the shares below offering price in order to make a small profit on the offering fill? I agree it is more likely that the market took the non-sold-out offering as very bad news...but isn't what I've suggested at least a possibility.

If this is what happened, didn't the offering subscribers get ripped off?