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Technology Stocks : The New QLogic (ANCR)
QLGC 16.070.0%Aug 24 5:00 PM EST
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To: Ken Richard who wrote (18381)10/4/1998 11:49:00 PM
From: Greg Hull   of 29386
 
Ken,

<<Are you saying the purpose of the short is to drive the conversion price down ? If so, they still have an interest in the share price increasing so as to get most from the sale of the converted shares, right?>>

It is my impression that the preferred shareholders do not control the jumps in price - news does that - but I think they control the periods between announcements. For Series B holders to get maximum advantage of news inspired price jumps, they would like 5 days of low prices immediately preceding the announcement. Series C holders only need 3 low days sometime in the last 18 trading days.

<<If this is true, would we expect to have a sine-wave trading pattern until all of the shares are converted ?>>

I think the preferred shareholders sell into the buying strength generated by good news. If there were a series of good news announcements, the buying strength would be sustained for days or weeks. This would allow the preferreds to sell many more shares than they were able to after the Inrange announcement. If there isn't enough good news, I think we will have many more cycles before the preferreds quit selling.

There has not been a lot of volume since 9/25. I don't know how many shares have to be sold to drive the price back down, but it may be not that many. I assume that the volume includes any converted shares that cover a short sale. I wonder what price is reported for this covering?

It looks like we will need several more Inrange announcements (at 2M shares/day) before this huge supply will be absorbed.

Greg
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