Hi Sue - that was an excellent suggestion that sandbag provided (i.e. "buyback") and one that has been mentioned in a a legal chat forum as a way to fight back against shorting that may be occurring under a convertible debenture. It would seem to me that TSIG has some good defenses that it may pursue to stop the bleeding in the share price. To do nothing is not an acceptable option IMO. A good start would be for Rob Gordon to act on Rich's offer in the near future.
Sue, what do you think about the following ? Your opinion is valued. Thanks. :~)
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washlaw.edu
----Original Message-----
From: Nelson E. Timken, Esq. [SMTP:netimken@erols.com]
Sent: Friday, February 19, 1999 5:31 PM
To: Multiple recipients of list
Subject: Re: Short Selling
"The only thing I can think of to discourage this might be for the
company to start a buyback program to reduce the float and up the price, thereby forcing the shorting party to cover."
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Along the same lines regarding floorless conversions/shorting/ increased dilution - I hope TSIG undertakes a careful review to determine whether they feel the stock price has been MANIPULATED.
My interpretation to date is (1) - Even with short selling specifically authorized under the terms of the private placement that TSIG entered into - short selling used in a MANIPULATIVE manner is prohibited by SEC regulations. (2) Also, take a careful look at Section 16b of Securities Exchange Act of 1934 regarding short-swing profits and see if you think this applies to the current situation. It is interesting to note that we now have J.R. LeShufy on the Board of Directors of TSIG and he was the president of the largest private placement holder - Basic Investments Ltd.
fast.quote.com
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test01.ljextra.com
Junk Equity Deals Can Harm Stock
While a 'floorless convertible' offering can help a struggling company, the floating conversion feature is potentially ruinous.
BY ROBERT C. FRIESE AND JAHAN P. RAISSI
SPECIAL TO THE NATIONAL LAW JOURNAL
"One theory included in some cases brought recently asserts liability for short-swing profits under § 16(b) of the Securities Exchange Act of 1934.10 A sometimes-overlooked consequence of the floating conversion feature is that, if the price of the common stock falls far enough and the number of shares received in a conversion balloons, the holder may unexpectedly become subject to the short-swing profit provisions of § 16 and the reporting requirements of § 13.11"
"The shorting of shares is not illegal, but when done with manipulative intent or by brokerage firms or individuals without the ability to deliver the underlying common shares, shorting can become illegal and manipulative.4 The theoretical limit on such manipulation should be the "borrowability" of the issuer's shares, which is often nonexistent in thinly traded stocks, even from brokerage firms with large "short boxes.""
"Yet the fact that there may be no shares available to borrow does not seem to have limited the sort of shorting activity that has driven down the shares of many companies relying on this financing vehicle. This raises obvious questions of manipulation and enforcement of what are primarily self-regulatory organization (SRO) rules limiting most naked short-selling."
"Similarly, both the Division of Corporation Finance and the Division of Enforcement of the Securities and Exchange Commission have been watching the developments surrounding floorless convertibles. The Division of Enforcement is investigating a number of floorless convertible offerings and the subsequent conversions and activity in the underlying common stock, some of which involve potential manipulative activity by entities and individuals abroad."
"On the one hand, the holders of the securities have a fairly straightforward contract claim for conversion and registration of the common shares. On the other hand, an issuer that can
demonstrate manipulative activity or other illegal activity on the part of the holders of these securities should fare well in halting or limiting a conversion or registration."
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nasdaq-amexnews.com
"If used to manipulate the price of the stock, short selling by the
holders of the Future Priced Security is prohibited by the
antifraud provisions of the securities laws and by NASD Rules
and may be prohibited by the terms of the placement."
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Securities Exchange Act of 1934
Section 9 -- Prohibition Against Manipulation of Security Prices
law.uc.edu
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Securities Exchange Act of 1934
Section 10 -- Regulation of the Use of Manipulative and Deceptive Devices
law.uc.edu
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Securities Exchange Act of 1934
Section 16 -- Directors, Officers, and Principal Stockholders
law.uc.edu
"b.For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer (other than an exempted security)within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty days after request or shall fail diligently to prosecute the same thereafter; but no such suit shall be brought more than two years after the date such profit was realized. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection."
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Securities Exchange Act of 1934
Section 18 -- Liability for Misleading Statements
law.uc.edu
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Regards,
Phil
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