Bill,
My assumption is that these shorts are for the most part professional shorts, who began their short position with the onset of the Castle Creek financing. More than 90% of companies issuing these floorless convertibles have failed to meet their milestones and the subsequent shorting and dilution have substantially depreciated the value of the stocks issuing these financing instruments.
So my assumption is that the shorting started with Valence's issuance of these securities, and has continued through the months following.
That is why we have seen what I believe is professional shorting as the initial shorts 'bring in their friends' to participate.
But I remain convinced that they 'got hooked' by playing the %s and not because of their knowledge of what progress the company is making - and despite the shorts and skeptics banter for more than 6 months, ever since Castle Creek dropped/postponed their initial floorless conversion date of late January, it should have been a signal that the company just might be able to find alternative financing mechanisms.
So now we have 2.1 mm shares short, and while some of that may be Castle Creek, it most certainly isn't the majority. I am of the opinion that Castle Creek did not take co-investors into this financing (which it normally does), because it wanted the 'whole hog'.
I am also of the opinion that they have consistently expressed interest in continued participation in financing Valence, not because they want to hedge their position, but because they like the upside much more than the downside. And I am of the opinion, as Rich Wolf states, that the recently announced $ 3 mm financing does not represent a struggling, last gasp financing but rather a fixed price commitment at a modest discount to the market which provides the company with some short term funding while they progress toward finalized purchased contract(s).
You state, "so they must know something that we don't know at this point." Why? Because they shorted? BFD.
They don't know more about the company. They will get creamed. But if you believe that these folks know more than the longs, or the company, or the investor(s) who just "invested millions", you had better, like Noway or J. Burr, get out and wait. Save yourself the angst. Buy it back at $ 5, or as that idiot MBA_007 says over on Yahoo, for $ 3, or $ 1. |
