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Strategies & Market Trends : Floorless Preferred Stock/Debenture

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To: Gerald Walls who wrote (862)	8/23/1999 11:53:00 PM
From: Lee Walsh	Read Replies (3) of 1438

Here is a new strategy that I learned tonight that some of the Canooks from the North are now doing: This is very interesting. There has been much mention on this thread and on other threads about some of the Canadian Companies that short against convertible Debentures....but here is a new twist that I've never heard of till tonight. I had a conversation today with a CFO of a small OTC-BB company... The conversation moved to Canadian Shorters, etc....and we found some common Ground. NOTE: THE FIGURES IN THIS EXAMPLE HAVE BEEN CHANGED TO PROTECT THE SOURCE OF THIS INFORMATION. But they are very similar. This small company was trading over $2.00 per share last December. They has some straight debt with another company/financing source of about $400,000 we'll just call that company "Global Finance". They received notice that their debt had been sold to Thomson Kernaghan !!!!! Thru their representative... Mark Valentine. Ok...so everything is cool right...this fine Canadian Company just bought this debt...and everything is just hunky-dory... But something interesting begins to happen....someone starts selling stock....and the price starts to drop.....down to about the .20 range....Then the company receives a call from ole Thomson Kernaghan...and the conversation goes something like this... TK: Yes sir, we're sure excited about your company and think it has a great future...in fact we would like to be a stockholder in you company....we would like to convert the debt that we hold in your company to stock....wouldn't that be great??? Now if you will just issue us about 2 million shares of stock (since the current market value is .20) We would just forgive this debt and we'll all live happily ever after...won't that just be neat. Company: Uh...yea...that sounds good...we won't have any debt and we won't have to service that debt anymore.... You really think our company is exciting huh....well, we are just so proud to have you as a shareholder.....ok you have a deal. OK, what do you think really happened here. TK...shorted the crap out of the stock....AGAINST A DEBT POSITION.... They probably took in about double what they had in debt...and then (the nerve of them) Converted that debt...(which they had already made back in selling stock) into a huge chunk of shares that basically made them the largest shareholder in the company.... Hostile Takeover. Moral of this story: "Don't take money from strangers".... If these guys own the sewer lines coming from the company washroom.....they'll short against the sewage. For my own safety and the safety of the company, I am not going to publish the name of this company....but I am hoping I can talk them into doing a deposition in the RTIN suit. I would bet that TK doesn't know who they are...as I'll bet they've done probably hundreds of these deals. These companies, TK, Soverign, Canadian Advantage...are still scouring the country like wolves...looking for Rabbits to devour....Even though they have several lawsuits pending against them because of this kind of activity.... Companies Beware!!! Interesting story....indeed Lee

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