Maurice,
Thanks for the play by play but I do see a few flaws in your analogy. First, as a shorter (and for most shorts) this is a very liquid position. I just finished my fourth short of this company and intend to continue to short it on every pop in price. If you are at all familiar with the process I can tell you I've been bought in twice, meaning I've had no control over when I had to buy due to brokers calling my shares due. Its my belief that if not for the forced buyins, G* would not have traded into the double digits and teens. In addition to this churning of the short shares, G* has just announce that it will be adding a significant amount of shares to the current outstanding (more than 10%)
In fact, since their announcement G* will have to sell an additional 30% more shares to capture the full $105 million they are after.
You are absolutely wrong about G* being able to sell shares into any type of runup. Are you at all familiar with private placements? Take a look at a company called ASYS, their recent run and the pp that took place. Very well planned, well orchestrated and fast. For a company like ASYS, secondary financing is available and easily obtained.
For G* its not so simple. They have announced to the world that their business plan is not working, that they are burning through cash and that they will continue to have a serious revenue shortfall for quite some time. For all intent, what happens to g* common shares is irrelevant. One look at the bonds and any good trader knows what the underlying sentiment for this company is. In fact, any company contemplating financing for g* would look at what the bonds are trading at and laugh. Hence, the structure of the Bear Sterns deal.
Every day this company continues with its revenue shortfall it goes further into debt or dilution, not pretty. How much further do you think this $100 million will get g*? Another quarter? Then what? How many more $100 million deals will shareholders sit through?
One more fact where you are wrong Maurice. Had not g* grabbed its LOC and now announced this financing deal they WOULD be out of money. So, to that point the shorts were right on target. G* can borrow itself into oblivion for all I care, every time they announce any type of financing its one more mountain they must climb. And don't forget, that mountain has been placed squarely on the back of the poor common shareholder.
Isn't it quite ironic Maurice that your group of posters here is now celebrating the simple fact that g* has obtained funding for another quarter or so? In all reality, and unless some dramatic changes are occurring, g* will be in need of many many more deals like the one we just saw. As the common shareholder gets more and more beat down I can only hope for these so called mysterious short squeezes because lately they are the only hope for higher prices to short into.
Regards. |
