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Strategies & Market Trends : Roger's 1998 Short Picks
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To: Mongo Slade who wrote (11243)7/9/1998 2:22:00 AM
From: BDR   of 18691
 
Q: What are floorless convertibles ?

In this case:

"The debentures are convertible into shares of SAC's common stock in
increments beginning 120 days from June 30, 1998 and are fully convertible
after 181 days. The conversion price equals the lesser of (a) 110% of the
closing bid price of the common stock on June 29, 1998, or (b) the average
closing bid price for a five-day period ending the day prior to the notice of
conversion multiplied by a discount factor, which discount will increase from
15% to 22% the longer the convertible debentures are held and not converted."

The reason they are so deleterious to the financial health of anyone holding stock in the company is described well in the July issue of the AAII Journal, page 26. The article is entitled "Some Words of Caution for Investors in High-Tech Speculative Stocks". It's on their website too, but you have to be a member to access the article online. The link provided in the previous post covers the main points.
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