WAVX: Wave Systems Corp. Message Board

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Technology Stocks : WAVX: Wave Systems Corp.

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From: TREND1	5/25/2007 11:47:38 AM
	of 604

*****Understanding the PIPE ........................ Very good. IMHO. ......................... Posted by: bbigtim In reply to: None Date:5/25/2007 10:38:32 AM Post #of 145251 Some Straight Talk The new private placement is an arbitrage placement. Unlike the last several placements at market, many if not most of the participants are not long-term investors. They are involved only to capture the arbitrage spread. The larger size of this placement is directly related to the substantial discount from the market price. Wave would probably have been doing larger and less frequent placements below the market all along, but they ran into a technical problem under the last shelf registration. Only a certain percentage of the total equity in a company can be placed below market under a single shelf registration without shareholder approval. Fortunately, Wave was in the process of transitioning to a real business with good prospects of profitability, so they were able to do smaller placements with real investors. The latest shelf registration contained a major clue that Wave might elect to go back to its traditional arbitrage mode. There was an explicit provision permitting shorting against the box. As Ramsey noted earlier today, Wave needs financial stability to assure its prospective enterprise customers that it will continue to be around to support their purchases. To secure a large enough placement, they decided to go back to the older arbitrage method. It smells but it works like a charm. I understand the feelings of those who are offended by this game, but unfortunately it is more reliable than the alternatives. I would probably have done the same thing as Wave management in their place. The recent weakness in the share price was likely directly attributable to some modest shorting against the box by investors who expected to receive an allocation in the placement. Some of the remaining placement stock will also be made available now by those participants, but only at a profit. There should be sufficient supply at prices above the placement price for those who want to add. For the moment, the placement price should serve as a pretty good support level. Those who wish to add to their positions should consider doing so soon. If Wave is about to become a profitable business, as most here believe, there will probably be no more of these arbitrage operations. P.S. I added a small amount this morning at $2.11.

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