To: Tastes Like Chicken (0 )
From: sshia Thursday, Dec 16 1999 10:30AM ET
Reply # of 126
NTPL Shorts Get Shocked
Since we had problems with our "listbot newsletter" this morning, we are posting our morning report on NTPL here!
12/16/99
The Individual Investor's Analyst
The Newsletter For Long Term Investors
Hey, if you?re the least bit scared that NTPL stock had a drop yesterday, check this out. Our research reveals as a positive fact that certain institutions have been getting calls from people (who are short) looking for blocks of stock to buy to cover!!!
So, why would anybody short NTPL? Every stock has a measure of short positions. In yesterday's action, we believe certain traders entered into a short position because they incorrectly thought that just less than two million NTPL shares (from warrants) would be dumped on the market. (This is not true. Read on.)
But, oh boy, did these guys get shocked that afternoon!!! When the stock dipped into the 5s, the fire sale didn?t last five minutes. Listen to this quote from a correspondent on the street. ?As soon as I called [xxxxx], the stock [NTPL] went up a point in five minutes, and some of these traders who were selling stock came back in to buy the stock. More are lined up for this morning.?
See what happened? Those shorts hunting the large blocks of stocks from institutions jumped in to buy and dried up the supply!!! As a result, NTPL zoomed back into the 6s, then closed at 6 9/32nds.
These two million NTPL short shares, exercised from warrants, actually entered the float weeks ago, when we were having those multiple million share trading days.
There is a possibility some shorting will continue, but hold onto the stock. We strongly believe any dip in the stock is a buy. Our research reveals that institutional buyers now know what is going on and are poised to buy shares.
This is all very exciting and you should be happy if you are long NTPL because this is a great company with much good news to come, we know for sure. You will see. Our investigative research reveals deals, deals coming up that will have you smiling you own NTPL, so don?t get scared. Hang on tight. Hold your cards. You have nothing to fear, but the shorts, oh boy, I would not want to be in their financial positions.
Warrants & What They Mean
We hesitate to explain much about the warrants because this can get complicated, but try to follow the basics of it.
Netplex had a little less than two million warrants, which they were able to call upon the stock reaching $4 for 20 days. That would mean the company would get approximately $10 million in cash. The way this works is the warrant holder pays NTPL for the warrant (most are from $2.50 to $4.00) and then he has the stock to sell, like at say $7. Over the last three weeks, at least 1.7 million of these warrants (of the 1.9 million) have already been sold on the market.
So, the good news is the market absorbed all those warrants. Anyone who thinks those warrants are going to hit the market is incorrect because they have ALREADY hit the market. That?s where all that volume came from when NTPL was posting 8 million and 6 million and 4 million share days. The people holding onto warrants (that go back to 1996) sold them at $7, or whatever the share price, and then sent the company the cash to exercise them.
The fact that the market absorbed all those warrants is great for longs. We have evidence that a certain group of investors was mistaken yesterday about the warrants and figured they were to come on the market and push down the price. This did not happen. That shorting firm did not realize that almost all these warrants were already gone!!! We believe this is actually what happened, from our original research.
So, let us repeat. Anyone who thinks those warrants are out there that are shorting the market in anticipation of them coming out, they are going to be stuck holding a short.
How Does The Larger Float Help The Stock?
With most of the warrants in, NTPL is flush with extra cash-- the $10 million we mentioned above-- plus they?ve added float. How does increasing the float help? It increases the liquidity of the NTPL stock, which has a low float. Institutions want to make sure there is enough stock out there for them to buy and sell, which spells liquidity. NTPL had, at one point, only about 6 million shares float, now there is closer to 8.
Let?s say you are a major fund and you want to take a position in NTPL. If you have a $500 million fund, you want to make an investment of at least a couple million dollars in a company, otherwise you have too many companies to follow. So, if you want to buy $2 million worth of stock and the stock is $5 per share, you?ve got to buy 400,000 shares, which on the open market is a significant percentage of the float of the stock when there are less shares outstanding.
So, an institution wants to make sure there are enough shares floating for a liquidity so there is a true currency. Otherwise, if there is not enough stock, when you buy the stock you are going to raise the price too high. Or, if you want to get out, you would depress the stock. So, institutions encourage and want to see a lot of float and volume in which they could easily invest or divest their positions.
In Summation
NTPL cleaned out virtually most of the warrants, added $10 million to their bank account, and are getting more institutions to take positions in the stock. More good news is on the way as far as E-Solutions deals with major companies and the Techcellence program is heating up as the ad campaign moves forward.
For now, look for good business news from NTPL to go along with their much sweetened financial position.
Nobody should be forgetting a spinoff of Techcellence is a very big possibility, which will be a very hot IPO when it comes out. As a shareholder, we believe that you will be one of the ones to own these new shares.
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