Insider buys $42M in Redback stock

In advance of a proposed public offering of the company's stock, a group led in part by one of Redback Networks' directors is purchasing nearly $42 million in the company's stock, regulatory filings revealed this week.

On May 9, TCV Funds agreed to purchase 1,927,500 shares of Redback common stock from Quattro Global Capital (advisors to the Alta Partners investment group) at $21.75 per share. TCV Funds was set up by Technology Crossover Ventures, a Redback investor whose director, John Drew, also sits on Redback's board of directors.

Insiders taking a greater stake in the company is generally an encouraging sign to investors, said Joanna Makris, an analyst who covers Redback for Canaccord Adams, and TCV's move is no exception. "The increased stake, to a lot of people, shows validation," she said.

Drew gained his seat on Redback's board as part of a $30 million round of funding from Technology Crossover Ventures in early 2004, when Redback was emerging from Chapter 11 bankruptcy.

Not including the aforementioned purchase, TCV Funds owns 14.02% of Redback's stock. The Quattro deal would give it about 3% more. The equipment vendor amended its shareholders' rights plan to allow TCV to purchase--through the Quattro transaction and future purchases--up to 19.9% of Redback's common stock.

Redback also proposed a public offering this week of 3.5 million shares of common stock. According to regulatory filings, Quattro Global, which today owns slightly more than 14% of Redback's stock (11% after the TCV sale), may also sell an additional 4,698,000 shares of common stock in the offering.

Quattro Global got its stake in February 2006 from Creedon Keller & Partners, whose managing director until June 2005 was Redback's chairman, Paul Giordano.