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Microcap & Penny Stocks : EXSO -- Consolidated Eco-Systems (Exsorbet Industries)
EXSO 0.00010000.0%Mar 7 3:00 PM EST
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To: Zeev Hed who wrote (557)7/26/1997 5:26:00 PM
From: JetsonB   of 5015
 
Hey Zeev Or Anybody Else,

I think I understand this shorting against the block stuff that's going on with EXSO - except for one minor point. But before I get to that, let me list the items that I think I reasonably understand:

1.) The shorts (those doing the shorting of EXSO) are those people who own the
convertible debentures. As selling pressure by the shorts causes the price to
drop, the debentures can be converted into even more shares. A downward spiral
is created.

2.) Unlike normal short selling, the price does not rise when the shorts cover their
position because they do not have to buy shares to cover their position, they
simply convert the debenutres into shares and return them to the lender.

But here's the part that I'm not getting: Until the debentures are converted into shares, where do the shares that are being sold short come from? How do the
shorts deliver the yet-to-be-converted shares to the buyer? It seems that the only way that they can accomplish this is if their is some reasonably long time allowed for
delivery of shares to the buyer.

Now all of this does seem possible if I slightly modify a thing or two. Instead of
converting shares at the latest possible conversion date, are you sure that they
don't convert the debentures on a "as-needed basis." - that is, only converting
enough debentures to cover the most recent short sale, then resuming the short selling with remaining debenures. And then this process would repeat itself many
times until all of the debentures are converted or the date approaches when the
shares must be converted.

This one little sticking point in my understanding is frustrating me!

Thanks,
Jetson B

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