This morning Palm announced that it plans to exercise rights to sell about 18.5 million shares of its stock in order to build up capital. The company has current cash reserves of just $220 million, and it needs the cash to see the Pre through its launch later this year.Last week, Palm admitted that since it announced the Pre smartphone and webOS, it has seen a dramatic slowdown in the purchase of its older models. In fact, Palm issued revised guidance for the latest quarter. Word is that anticipation for the Pre is so high, that no one wants to buy the old stuff. Not that I blame anyone.

The result is lost revenue and cash for Palm, which is still working to finalize the Pre. It has about $220 million in the bank right now, but the company appears to be unsure if that amount will get it through the next several months before the Pre launches.

Solution? Sell stock!

Palm plans to remarket 18.5 million common shares that are held by investor Elevation Partners. Based on the latest price for Palm's stock, the shares could fetch nearly $105 million.

Elevation would need to be repaid the $49 million it paid for those shares. After Palm repays Elevation, it stands to take in about $56 million if it can find buyers for the shares.

In a prepared statement, Palm said, "These proceeds would be used to strengthen Palm's working capital position and to further bolster the resources Palm is devoting to the launch of the Palm Pre and future product-development efforts."

The Pre has potential to be a smash hit. The new mobile operating system from Palm has "winner" written all over it. It's a shame Palm couldn't get the Pre and webOS to market sooner. Even so, Palm needs to hold on a few more months to get the Pre to market. Hopefully this stop-gap works.