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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: LLCF who wrote (87507)3/29/2001 12:42:18 PM
From: Box-By-The-Riviera™  Read Replies (1) of 436258
 
just in case you need this: from internet stock report

Convertibles: Here, an investor gets a security that can be converted into common stock. This security may be a preferred stock, which gets higher priority than common stockholders if there is a liquidation. Or, the security may be a debenture or note; that is, a debt instrument that has a higher priority than preferred stock.

The conversion price of the convertible - the price that an investor can swap it for common stock - is at a premium to the market price. This can range from 5% to 20%.

Some convertibles have reset provision. In other words, the conversion price falls as the stock price falls. This can set the stage for a death spiral. For example, the investor can short the stock, as the reset price falls, and then swap the convertibles at the reduced price. This can be extremely lucrative. Unfortunately, the stock price will get pummeled. It is for this reason that convertibles are often referred to as "toxic convertibles."

True, some convertible deals have "no-short" provisions. But this is little comfort. You see, it is easy to set up offshore funds to handle the short-sales. It is virtually impossible to track.
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