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Non-Tech : Cityscape Financial (CTYS)

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To: Robert T. Quasius who wrote (893)	10/13/1997 6:39:00 PM
From: Rational	of 2544

I have been thinking about the convertible holders shorting and converting into common stock after the price droped sufficiently as a result of their short-selling. But, a point of information: Half of the convertible holders have already converted -- they might have done this trick of shorting at $22, converting at $10 and covering with the converted shares. The remaining half who may convert only after the deadline of Octoer 9 could have adopted this trick, say in September when the price was $12. In effect, it is like selling securities before registration. Legally, they cannot sell the shares obtained from conversion before the deadline as per CTYS filing for registration of 6 million shares. I do not know if this legal restriction applies to short-selling and whether or not such activities are being monitored. This seems to be a grey area. Will the large institutional convertible holders engage in such corruption? There are 3 million conversion shares still remaining to be converted and short-selling these would have already put a tremendous pressure on the market price -- maybe it already did since the end of September. To preclude the public from learning that the institutional onvertible holders short-sold before filing for registration, these smart guys must convert into common stock and cover their positions before October 13 so that these 3 million shares are not picked up in the NASDAQ report as of Oct 15. The good news may be that there will be no more institutional short-selling and so the price may inch up. The bad news (which does not affect most of us) is that institutional convertible preferred stockholders can blackmail other shareholders. I want to send a letter to SEC about this possibility -- such shortselling appears to be a security fraud. Any comments, anyone? Sankar

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