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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: P. Ramamoorthy who wrote (14865)9/27/1999 5:07:00 PM
From: I. N. Vester  Read Replies (1) of 27311
 
Ram, Paul has already answered your question.
The theory is that CC has hard rules not to
be exposed to any risk. If they got
any shares via conversion which were not
already shorted then they will sell those
shares as soon as possible even if
common sense dictates they could probably
get more for them.

also since they still have the unconverted
position, keeping the price lower helps them
get a better price for those shares.

The 'risk aversion' theory is exactly what
Zeev and Larry believed from the beginning,
e.g. that CC may have shorted against the
entire Class A issue before getting the
class B.

I think it will turn out that they could
have made much more on the long side, but they
could have been risk free in their entire
investment from the very beginning. The
floorless virtually guaranteed that as long
as the shares kept trading, they could sell
for more than their conversion price at any
price.

This would also explain why they did not
convert the entire B class at $4.5 when they
had the chance. I.e. they would not want to
buy even at maybe a good price, because it would
leave them naked long which they don't like.
They would rather settle for a smaller profit
than take any risk, when they can remain
completely riskless instead.

If they were the perfect traders that Larry has
always maintained they were, then they would be
selling in small drips at $6 now. But they know
they are not perfect traders since unlike Larry
they don't always trade in 20/20 hindsight.
Instead they play safe even if it looks counter-
intuitive.
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