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Microcap & Penny Stocks : FRANKLIN TELECOM (FTEL)
FTEL 3.080-12.0%3:59 PM EST
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To: James Erceg who wrote (12257)6/14/1997 4:56:00 AM
From: M Allen   of 41046
 
>can you explain again why it is your belief that the short-term price will be >affected by the S1?

1. The S1 will register as free trading shares the underlying shares for warrants that have been issued by FTEL.

2. A significant percentage of those warrants are held by market makers.

3. The warrants allow for the purchase of shares at $1.35.

4. By selling shares now and staying short the market makers can later cover those shares by exercising the warrants. This locks in profits for them.

5. The effect of the above is for the price to continue to drop until it approaches the exercise price of the warrant.

If you read back, you will find that some of those now doubting the above scenario have previously blamed market makers for all types of dastardly deeds. Yet somehow they can no longer believe that the market makers would do something negative to this stock.

Also you can find various postings throughout SI talking about the negative effects of warrants, reg "S" offerings and convertible debentures. What each of these have in common, is the availability to certain individuals of stock at prices below the current market price. The common effect is for the price of the stock to go down.
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