Fred, et.al.: Castle Creek? Wooo weeee! Others such as P. Ram, et.al., have already given you the horror story, but the bottom line is this.
Castle Creeks' crew are professional hedgies who have an almost obsessive focus on maximizing return in the shortest period possible. They don't give two *ahem* about the company whom they've formed a financial relationship. I'll give you two recent examples:
VLNC, and WSTL.
Both have good "stories," and a great future ahead(imho, of course). But both were in need of financing at one point, and both used Castle. Now....in these cases a floor-less convertible was used. Floor-less convertibles, I've come to understand, are the market-place equivalent of handing your gun to a robber and saying...."Here...rob me..." There's a floor-less convertible thread here on SI, where-in is contained sufficient information as can educate you. The thing to understand is a floor-less is a license by the warrant-holder/financial instrument holder, to short, and short BIG-TIME, using the financial instrument as collateral!
Is this the same situation with LUMM? Hmmmm....not exactly, although having a floor at $7 is, from where the security stands now, certainly a support level waaaay far down. Other aspects of the financing, having not read it through yet, may be different, too. Different in such a manner that one need not be too concerned. But even so, Castle and their employees(and those "hangers-on's" who look for Castle "victims" and then initiate their own plans) are professional sharks, so caution in your own speculation style is now warranted. I would not assume they're here to bolster LUMM's progress. I'd sooner assume they're here merely to line their own pockets, come hell or high water.
The saving grace? Knowledge is power, and can prevent you from getting....uh....raped. It does make me wonder if LUMM management was cognizant of Castles history at the time they signed on the dotted line. I gotta think it'd have made them pause, eh?
Still, WSTL & VLNC survived Castles attack, albeit some investors got badly hurt(they had gambled on margin and such, so when the shorting began in earnest...WHAM!). Both companies are now moving forwards with their business plans in successful fashion. So the same can happen with LUMM.
Just keep a sharp eye on those fins rapidly approaching in the waters.....
John~ |
