Floorless Preferred Stock/Debenture Message Board

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Strategies & Market Trends : Floorless Preferred Stock/Debenture

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To: Zeev Hed who wrote (1374)	1/20/2002 8:18:31 PM
From: Roger A. Babb	Read Replies (1) of 1438

Zeev, it is interested that all of us on this thread missed shorting the largest floorless convertible ever with Enron. Of course it was well hidden, not even an 8k or a note from the auditor to give it away. There was one big signal that I missed. Usually floorless convertibles are accompanied by "secret stock loans" by management. These can be sometimes detected by observing insiders exercising options without a corresponding sale, that often means that the option was exercised for the purpose of feeding shares to the stock loan shark who is then selling them to cover the loan. These are not reported as insider sales because the insider has the option of paying off the loan and getting back his shares, which of course never happens.

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