verdad,
Good news is in the eye of the beholder, or in this instance, the shareholder I guess... <wink>
Consider this.
Lucent could not be legally shorted by the small investor in the USA for the past how many months now, because the stock was under $5. Much of the current short interest was likely instituted at some point in time when the stock traded above $5.
Lucy is likely cranking up the printing press, printing additional shares for a convertible debt reduction, and a corresponding overall reduction in debt.
So they do the reverse split, right? Bring the price up to somewhere near or about $15? Now what happens? If I'm one of the entities receiving equity to replace my debt, you can darn well bet I'm going to immediately short those newly minted shares, because if I don't, I'm taking on higher risk than I had with the debt. At least with a short, I've locked in a known profit/loss before any damage can happen to my "newly found" capital.
And if I sell any of the new shares into the open market, then that will create additional shares that can be borrowed to create a legal short. Sounds like a Catch-22, huh?
But the real news with Lucent is not the shares or the reverse split. It's the staggering debt load that they continue to carry, not unlike virtually every other company in telecommunications. And reducing the debt by a billion here and a billion there, significantly increasing the outstanding equity shares in the process??? Well, just how long is the share price going to stay in the neighborhood of $15? How many times can they go to the well and replace debt with equity? How do they increase margins and revenues and pay off that debt?
I'm guessing the stock doesn't stay at around $15 for too long, but what do I know???
KJC |
