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Technology Stocks : Pioneer-Standard Electronics, PIOS
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To: sandintoes who wrote (35)10/1/1999 11:04:00 PM
From: GreenKeeper  Read Replies (1) of 73
 
If I am understanding the PIOS ceiling, it appears that there are 9 million debentures that pay 9% to holders and can be traded for shares at 15.75.

That means to me that they act like Call options against a short position. A debenture holder has no fear of a run up in this stock's price, because 15.75 is as bad as it can get for his short position. (He sells shares he doesn't own at 14.50, knowing he can replace them at 15.75 worst case, but most likely can replace them at some point for 13.50 or less while waiting for something to happen).

Another way the debenture holder can play it is sell shares for quick profits ... Just buy at 13.50 and sell at 14.50 and keep repeating until the breakout, which is not missed because the debentures secure all upside beyond 15.75.

I am currently long PIOS. It feels like a safe shot at a buyout, with little downside below 12 (assuming earnings keep coming and the debenture guys keep playing this trading range). But I am contemplating joining their game. Why not buy at 13.50 and sell at 14.50 along with them? The sold shares might miss a run up, but my core shares will participate, and I am never short so there is no hedge side to cover.

Anybody follow this circular logic? There appears to be a $1 coupon to be clipped here, if this mini roller coaster keeps repeating.

GK
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