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Technology Stocks : The New QLogic (ANCR)
QLGC 16.070.0%Aug 24 5:00 PM EST
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To: srvhap who wrote (26797)5/9/2000 12:14:00 AM
From: George Dawson  Read Replies (1) of 29386
 
There is no reason to think this resembles a floorless convertible. Remember the key aspect with this type of financing is that the value of the convertible preferred shares is fixed and the stock the preferred shares is being converted into is not. This leads to the drop in the convertible issues.

In this case the conversion of Ancor to Qlogic is fixed. There is no potential multiplicative effect on either share. There certainly is no incentive for for either company to drop the share price, in fact the stock price of Ancor is dissociated from its actual value due to the trading action. The only people who want the price to go down are the shorts and there is a possibility that a large short position was recently established. In the recent past their strategy has been to average up and wait for the eventual decrease in Ancor stock price and it has been an effective strategy.

I imagine we will be seeing explanations of how the price was set in the near future. For now I am with Steve, this sounds like a good deal to me - possibly a great deal for both Ancor and QLogic shareholders.

BTW - we have had posts recently by one of the experts in floorless convertibles. Zeev, I know you are watching. What do you think of my explanation on this issue? I would also be interested in your opinion on the arbitrage possibilities. I have the opinion of one trader that this is unlikely.

George
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