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Strategies & Market Trends : Floorless Preferred Stock/Debenture
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To: Lee Walsh who wrote (323)3/13/1999 11:35:00 AM
From: Mama Bear  Read Replies (1) of 1438
 
"I sincerely hope that the SEC looks into them, and the legality of the deals are challenged in the courts, as some companies seem to be doing. "

To the best of my knowledge none of the companies who have attempted to breach their contracts have prevailed.

"There has to be a limit on the amount of shares they can convert into"

There is a limit of an increase of 20% of the outstanding shares without a shareholder vote.

"as you say "rob" from the shareholders."

I would suggest that the fault lies not with the convert writers, but the management of the companies. It is their fiduciary duty to look after the interests of the shareholders. I submit that these same managers will find another way to run the company into the ground if junk equity schemes are made illegal, or restricted. Actually, the most likely outcome is that the companies will go belly up that much quicker, as this type of financing is usually the last resort for a company that doesn't have anything to offer.

Barb
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