VALENCE TECHNOLOGY (VLNC) Message Board

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Technology Stocks : VALENCE TECHNOLOGY (VLNC)

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To: Larry Brubaker who wrote (14095)	9/1/1999 3:21:00 AM
From: kolo55	Read Replies (2) of 27311

Your theory was that CC was in a no-lose position. From the post: <<Larry, you've been telling us Castle Creek can't lose, even if Valence collapses. >> Yes Paul. The reason deals like this are made (floorless conversion priveleges) are set up this way is because it is a high risk investment that no institutional investor would touch at a fixed price. Current comments: Larry, we went over and over this... you postulated that there was no way that CC could lose on their investment. I pointed out that CC was still net long at the time, and could still lose money if the stock price dropped. Remember that you and Zeev felt that CC had already converted a sizable number of preferred shares, and sold off the common stock from the conversion? Zeev even felt that CC had hedged half their preferred B through short sales already last March. I simply pointed out, that this was impossible at that time, given the reported short position. It was clear CC had a significant net long position at that time. We spent a whole weekend on this issue... In the end I had to back off from my assertion that CC couldn't be shorting a significant number of shares without SEC disclosure when we discussed the 4.9% limitation clause. You and Zeev had to back off your assertion that CC had been converting preferred shares, and your assertion that CC didn't have to include any preferred shares in the beneficial ownership calculation, only common shares received in the conversion. And we established that CC had a stake in Valence succeeding... they had and still do have a significant upside if Valence succeeds, and a downside (although limited to a sizable extent) if they fail. Paul

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